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<div class="csl-entry">Magenschab, A. (2008). <i>The potential approach to the term structure of interest rates : theory and application</i> [Diploma Thesis, Technische Universität Wien]. reposiTUm. https://resolver.obvsg.at/urn:nbn:at:at-ubtuw:1-29668</div>
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The main aim of this text is a new approach to the term structure of interest rates called the potential approach. The key element of this approach is to view the state-price density (a positive supermartingale) as the modelling primitive and to express the prices of derivaties directly in terms of this. In this framework prices of zero-bonds are expressed in terms of conditional expectations, which leads us to the concept of modeling with Markov processes. First the theory is presented and then used in a various number of simulations using a Markov process in continuous time with finite state-space and continuous state-space.<br />
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dc.description.abstract
The main aim of this text is a new approach to the term structure of interest rates called the potential approach. The key element of this approach is to view the state-price density (a positive supermartingale) as the modelling primitive and to express the prices of derivaties directly in terms of this. In this framework prices of zero-bonds are expressed in terms of conditional expectations, which leads us to the concept of modeling with Markov processes. First the theory is presented and then used in a various number of simulations using a Markov process in continuous time with finite state-space and continuous state-space.