
Digital
Library of the European Council for Modelling
and Simulation 
Title: 
Indexed Bonds With
MeanReverting Risk Factors 
Authors: 
Attila
A. Vig, Agnes VidovicsDancs 
Published in: 
(2017).ECMS 2017 Proceedings
Edited by: Zita Zoltay Paprika, Péter Horák, Kata Váradi, Péter Tamás
Zwierczyk, Ágnes VidovicsDancs, János Péter Rádics European Council for Modeling and Simulation. doi:10.7148/2017 ISBN:
9780993244049/ ISBN:
9780993244056 (CD) 31st European Conference on Modelling and
Simulation, Budapest, Hungary, May 23^{rd}
– May 26^{th}, 2017 
Citation
format: 
Attila
A. Vig, Agnes VidovicsDancs (2017). Indexed Bonds With MeanReverting Risk
Factors, ECMS 2017 Proceedings Edited by: Zita Zoltay Paprika, Péter Horák,
Kata Váradi, Péter Tamás Zwierczyk, Ágnes VidovicsDancs, János Péter
Rádics European Council for Modeling and Simulation. doi:
10.7148/20170081 
DOI: 
https://doi.org/10.7148/20170081 
Abstract: 
In
this paper, we focus on the value of inflationindexed bonds in an extended
short rate framework. In the model, we assume meanreverting stochastic
dynamics under the risk neutral measure for both the short interest rate and
the instantaneous inflation rate. We define the zerocoupon inflationindexed
bond, and first estimate its value by Monte Carlo simulation, then deduce an
analytical formula as well. We briefly touch on the yield and inflation
curves the model is able to produce. 
Full
text: 