If you need an accessible version of this item please contact JSTOR User Support

Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation

David Heath, Robert Jarrow and Andrew Morton
Econometrica
Vol. 60, No. 1 (Jan., 1992), pp. 77-105
Published by: Econometric Society
DOI: 10.2307/2951677
Stable URL: http://www.jstor.org/stable/2951677
Page Count: 29
  • Download PDF
  • Cite this Item

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support
Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation
Preview not available

Abstract

This paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates. The methodology, based on the equivalent martingale measure technique, takes as given an initial forward rate curve and a family of potential stochastic processes for its subsequent movements. A no arbitrage condition restricts this family of processes yielding valuation formulae for interest rate sensitive contingent claims which do not explicitly depend on the market prices of risk. Examples are provided to illustrate the key results.

Page Thumbnails

  • Thumbnail: Page 
77
    77
  • Thumbnail: Page 
78
    78
  • Thumbnail: Page 
79
    79
  • Thumbnail: Page 
80
    80
  • Thumbnail: Page 
81
    81
  • Thumbnail: Page 
82
    82
  • Thumbnail: Page 
83
    83
  • Thumbnail: Page 
84
    84
  • Thumbnail: Page 
85
    85
  • Thumbnail: Page 
86
    86
  • Thumbnail: Page 
87
    87
  • Thumbnail: Page 
88
    88
  • Thumbnail: Page 
89
    89
  • Thumbnail: Page 
90
    90
  • Thumbnail: Page 
91
    91
  • Thumbnail: Page 
92
    92
  • Thumbnail: Page 
93
    93
  • Thumbnail: Page 
94
    94
  • Thumbnail: Page 
95
    95
  • Thumbnail: Page 
96
    96
  • Thumbnail: Page 
97
    97
  • Thumbnail: Page 
98
    98
  • Thumbnail: Page 
99
    99
  • Thumbnail: Page 
100
    100
  • Thumbnail: Page 
101
    101
  • Thumbnail: Page 
102
    102
  • Thumbnail: Page 
103
    103
  • Thumbnail: Page 
104
    104
  • Thumbnail: Page 
105
    105