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An Evaluation of Contingent Claims Using the CKLS Interest Rate Model: An Analysis of Australia, Japan, and the United Kingdom

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Abstract

In this paper we apply a new efficient numerical method for valuing default free bonds and contingent claims within the CKLS interest rate model. Using historical parameter estimates of the CKLS model for Australia, Japan, and the United Kingdom we compare implied bond and contingent claim prices. Our results indicate that default free bond prices and contingent claim prices are sensitive to the underlying interest rate model used.

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Authors and Affiliations

  1. Canterbury Business School, University of Kent, Canterbury, Kent, CT2 7NZ, U.K.

    K. Ben Nowman

  2. Department of Accounting, Finance and Law, Faculty of Management, University of Stirling, Stirling, Scotland, FK9 4LA, U.K.

    Ghulam Sorwar

Authors
  1. K. Ben Nowman
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  2. Ghulam Sorwar
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Nowman, K.B., Sorwar, G. An Evaluation of Contingent Claims Using the CKLS Interest Rate Model: An Analysis of Australia, Japan, and the United Kingdom. Asia-Pacific Financial Markets 6, 205–219 (1999). https://doi.org/10.1023/A:1010013604561

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