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THE DOTHAN PRICING MODEL REVISITED
Author(s) -
Pintoux Caroline,
Privault Nicolas
Publication year - 2011
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/j.1467-9965.2010.00434.x
Subject(s) - bond valuation , bond , zero coupon bond , mathematics , maturity (psychological) , mathematical economics , zero (linguistics) , economics , coupon , econometrics , philosophy , finance , psychology , developmental psychology , linguistics
We compute zero‐coupon bond prices in the Dothan model by solving the associated PDE using integral representations of heat kernels and Hartman–Watson distributions. We obtain several integral formulas for the price P ( t , T ) at time t > 0 of a bond with maturity T > 0 that complete those of the original paper of Dothan, which are shown not to always satisfy the boundary condition P ( T , T ) = 1 .