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THE TWO‐STATE INTEREST RATE MODEL FOR PRICING BONDS: AN EMPIRICAL ANALYSIS
Author(s) -
Bhagwat Yatin N.,
Ehrhardt Michael C.,
Johnson David W.
Publication year - 1991
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1991.tb00649.x
Subject(s) - interest rate , bond , state (computer science) , econometrics , economics , basis (linear algebra) , computer science , monetary economics , mathematics , finance , algorithm , geometry
The two‐state interest rate model is evaluated on the basis of its ability to price samples of government bonds. Its accuracy is shown to be comparable to that of a sophisticated continuous time model.