Abstract
This paper proposes a new interest rate model by using uncertain mean-reverting differential equation. Based on the model, the pricing formulas of the zero-coupon bond, the interest rate ceiling and interest rate floor are derived respectively according to Yao-Chen formula. The symmetry appears in mathematical formulations of the interest rate ceiling and interest rate floor pricing formula. Furthermore, the model is applied to depict Hong Kong interbank offered rate (Hibor). Finally the parameter estimation by the method of moments and hypothesis test is completed.
Funder
Ph.d Scientific Research Foundation of Liaocheng University
Natural Science Foundation of Shandong Province
Subject
Physics and Astronomy (miscellaneous),General Mathematics,Chemistry (miscellaneous),Computer Science (miscellaneous)