Next Article in Journal
The Ethical City: A Rationale for an Urgent New Urban Agenda
Next Article in Special Issue
A Fuzzy Expression Way for Air Quality Index with More Comprehensive Information
Previous Article in Journal
Grassland and Wheat Loss Affected by Corn and Soybean Expansion in the Midwest Corn Belt Region, 2006–2013
Article Menu

Export Article

Open AccessArticle
Sustainability 2016, 8(11), 1186; doi:10.3390/su8111186

Valuing Interest Rate Swap Contracts in Uncertain Financial Market

1,†
,
2,* and 2
1
Department of Electrical and Computer Engineering, Stevens Institute of Technology, Hoboken, NJ 07030, USA
2
School of Information, Renmin University, Beijing 100872, China
Current address: School of Finance, Nankai University, Tianjin 300071, China.
*
Author to whom correspondence should be addressed.
Academic Editors: Xiang Li, Jian Zhou, Hua Ke, Xiangfeng Yang and Giuseppe Ioppolo
Received: 12 September 2016 / Revised: 25 October 2016 / Accepted: 3 November 2016 / Published: 18 November 2016
View Full-Text   |   Download PDF [248 KB, uploaded 18 November 2016]

Abstract

Swap is a financial contract between two counterparties who agree to exchange one cash flow stream for another, according to some predetermined rules. When the cash flows are fixed rate interest and floating rate interest, the swap is called an interest rate swap. This paper investigates two valuation models of the interest rate swap contracts in the uncertain financial market. The new models are based on belief degrees, and require relatively less historical data compared to the traditional probability models. The first valuation model is designed for a mean-reversion term structure, while the second is designed for a term structure with hump effect. Explicit solutions are developed by using the Yao–Chen formula. Moreover, a numerical method is designed to calculate the value of the interest rate swap alternatively. Finally, two examples are given to show their applications and comparisons. View Full-Text
Keywords: interest rate swap; uncertain process; uncertain differential equation; Yao-Chen formula interest rate swap; uncertain process; uncertain differential equation; Yao-Chen formula
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

Scifeed alert for new publications

Never miss any articles matching your research from any publisher
  • Get alerts for new papers matching your research
  • Find out the new papers from selected authors
  • Updated daily for 49'000+ journals and 6000+ publishers
  • Define your Scifeed now

SciFeed Share & Cite This Article

MDPI and ACS Style

Xiao, C.; Zhang, Y.; Fu, Z. Valuing Interest Rate Swap Contracts in Uncertain Financial Market. Sustainability 2016, 8, 1186.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Sustainability EISSN 2071-1050 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top