Faster solutions for Black zero lower bound term structure models

Vol: 
66/2013
Author name: 
Krippner L
Year: 
2013
Month: 
September
Abstract: 

The Black framework offers a theoretically appealing way to model the term structure and gauge the stance of monetary policy when the zero lower bound of interest rates becomes constraining, but it is time consuming to apply using standard numerical methods. I outline a faster Monte Carlo simulation method for Black implementions, illustrate its performance for a one factor model, and then discuss the ready extension to models with multiple factors.

Publication file: 

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