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Università della Svizzera italiana

Valuation of two-factor interest rate contingent claims using Green's theorem

Sorwar, Ghulam ; Barone-Adesi, Giovanni

In: Applied mathematical finance, 2011, vol. 18, no. 4, p. 277-289

Over the years a number of two-factor interest rate models have been proposed that have formed the basis for the valuation of interest rate contingent claims. This valuation equation often takes the form of a partial differential equation, that is solved using the finite difference approach. In the case of two factor models this has resulted in solving two second order partial derivatives...