Abstract
We derive a form of the HJM model based on jump. Heath, Jarrow, and Morton(HJM) model is widely accepted as the most general methodology for term structure of interest rate models. We represent the HJM model with jump and give the analytic proof for the HJM model with jump. We perform the Monte Carlo simulation with several scenarios to achieve highly precise estimates with the brute force method in terms of mean standard error which is one measure of the sharpness of the point estimates. We have shown that bond prices in HJM jump-diffusion version models of the extended Vasicek and CIR models obtained by Monte Carlo simulation correspond with the closed form values.
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© 2006 Springer-Verlag Berlin Heidelberg
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Park, K., Kim, M., Kim, S. (2006). On Monte Carlo Simulation for the HJM Model Based on Jump. In: Alexandrov, V.N., van Albada, G.D., Sloot, P.M.A., Dongarra, J. (eds) Computational Science – ICCS 2006. ICCS 2006. Lecture Notes in Computer Science, vol 3991. Springer, Berlin, Heidelberg. https://doi.org/10.1007/11758501_10
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DOI: https://doi.org/10.1007/11758501_10
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