Economics, Econometrics and Finance
4 years ago

New model simplifies interest rate predictions, revolutionizing financial markets.

RePEc: Research Papers in Economics
Approximating Heath-Jarrow-Morton Non-Markovian Term Structure of Interest Rate Models with Markovian Systems
Ram Bhar, Carl Chiarella

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The article shows how to simplify complex interest rate models by turning them into simpler systems that are easier to work with. By using a set of equations, they were able to express the dynamics of interest rates in a more straightforward way. This allowed them to create a new equation that helps price financial options within this framework.