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The potential approach in practice

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  • Tino Kluge
  • L. C. G. Rogers

Abstract

The potential approach is a general and simple method for modelling interest rates, foreign exchange rates, and in principle other types of financial assets. This paper takes data on some liquid interest rate derivatives, and fits potential models using a small finite-state Markov chain as the base Markov process.

Suggested Citation

  • Tino Kluge & L. C. G. Rogers, 2012. "The potential approach in practice," Papers 1204.5718, arXiv.org.
    • Handle: RePEc:arx:papers:1204.5718
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    References listed on IDEAS

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    1. L. C. G. Rogers, 1997. "The Potential Approach to the Term Structure of Interest Rates and Foreign Exchange Rates," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 157-176, April.
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    Cited by:

    1. Matheus R Grasselli & Tsunehiro Tsujimoto, 2011. "Calibration of Chaotic Models for Interest Rates," Papers 1106.2478, arXiv.org.

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