Soft Computing

, Volume 22, Issue 2, pp 465–475 | Cite as

Interest rate model in uncertain environment based on exponential Ornstein–Uhlenbeck equation

Methodologies and Application

Abstract

As an important macroeconomic variable and monetary policy tool, interest rate has been included in the core of the economic analysis for a long time. Reasonable interest rate is significant in the aspects of improving the social credit level and playing the economic leverage role, so the modeling approach of interest rate is our concern. This paper proposes a new interest rate model on the basis of exponential Ornstein–Uhlenbeck equation under the uncertain environment. Based on the model, the pricing formulas of the zero-coupon bond, interest rate ceiling and interest rate floor are derived through the Yao–Chen formula. In addition, some numerical algorithms are designed to calculate the prices of derivations according to the pricing formulas above.

Keywords

Uncertainty theory Uncertain differential equation Interest rate model Pricing formulas 

Notes

Acknowledgments

This work was supported by the National Natural Science Foundation of China (Grant Nos. 61403360 and 61374082) and the Special Funds for Science and Education Fusion of University of Chinese Academy of Sciences.

Compliance with ethical standards

Conflicts of interest

The authors declare that they have no conflict of interest.

Ethical approval

This article does not contain any studies with human participants performed by any of the authors.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.School of Economics and ManagementUniversity of Chinese Academy of SciencesBeijingChina
  2. 2.School of InformationRenmin University of ChinaBeijingChina

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