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On Monte Carlo Simulation for the HJM Model Based on Jump

  • Kisoeb Park
  • Moonseong Kim
  • Seki Kim
Part of the Lecture Notes in Computer Science book series (LNCS, volume 3991)

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.

Keywords

Interest Rate Monte Carlo Simulation Term Structure Forward Rate Bond Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2006

Authors and Affiliations

  • Kisoeb Park
    • 1
  • Moonseong Kim
    • 2
  • Seki Kim
    • 1
  1. 1.Department of MathematicsSungkyunkwan UniversitySuwonKorea
  2. 2.School of Information and Communication EngineeringSungkyunkwan UniversitySuwonKorea

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