Protection against inflation is an essential part of the today' / s financial markets, particularly in high-inflation economies. Hence, nowadays inflation indexed instruments are being increasingly popular in the world financial markets. In this
thesis, we focus on pricing of the inflation-indexed bonds which are the unique inflation-indexed instruments traded in the Turkish bond market. Firstly, we review the Jarrow-Yildirim model which deals with pricing of the inflation-indexed instruments within the HJM framework. Then, we propose a pricing model that is an extension of the Jarrow-Yildirim model. The model allows instantaneous forward rates, inflation index and bond prices to be driven by both a standard
Brownian motion and a finite number of Poisson processes. A closed-form pricing formula for an European call option on the inflation index is also derived.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/3/12609792/index.pdf |
| Date | 01 August 2008 |
| Creators | Guney, Ibrahim Ethem |
| Contributors | Hayfavi, Azize |
| Publisher | METU |
| Source Sets | Middle East Technical Univ. |
| Language | English |
| Detected Language | English |
| Type | M.S. Thesis |
| Format | text/pdf |
| Rights | To liberate the content for public access |
Page generated in 0.0033 seconds