We consider a short rate model, driven by a stochastic process on the cone of positive semidefinite matrices. We propose a new closed form solution for the pricing of zero-coupon bonds and interest-rate derivatives, based on the Cameron-Martin approach outlined in Gnoatto and Grasselli (2011). Moreover, we derive sufficient conditions ensuring that the model replicates normal, inverse or humped yield curves.
We consider a short rate model, driven by a stochastic process on the cone of positive semidefinite matrices. We derive sufficient conditions ensuring that the model replicates normal, inverse or humped yield curves.
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propose a new closed form solution for the pricing of zero-coupon bonds and interest-rate derivatives, based on the Cameron-Martin approach outlined in Gnoatto and Grasselli (2011). Moreover, we