Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change

Philip Ajibola Bankole; Adeniyi Adewopo

doi:doi:10.11648/j.ijtam.20170301.14

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Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change

Philip Ajibola Bankole, Adeniyi Adewopo

Published in International Journal of Theoretical and Applied Mathematics (Volume 3, Issue 1)

Received: 31 October 2016 Accepted: 10 December 2016 Published: 7 January 2017

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Abstract

This paper focuses on Numéraire change technique for pricing financial assets with stochastic interest rate. It makes sense to introduce the notion of stochastic interest rate when dealing with long term option pricing problems rather than constant interest rate addressed in the past by most papers. We consider the application of Numéraire Change technique to pricing of Investor’s Savings Plan (ISP) with swaption between two interest rates, inflation and exchange rates of two different countries. The result shows that it is better to incorporate stochastic interest rate into long term option pricing problems and Numéraire technique is better applied if faced with several risks factors.

Published in	International Journal of Theoretical and Applied Mathematics (Volume 3, Issue 1)
DOI	10.11648/j.ijtam.20170301.14
Page(s)	25-29
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Numéraire Change, Stochastic Interest Rate, Investor Savings Plan (ISP)

References

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APA Style

Philip Ajibola Bankole, Adeniyi Adewopo. (2017). Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change. International Journal of Theoretical and Applied Mathematics, 3(1), 25-29. https://doi.org/10.11648/j.ijtam.20170301.14

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ACS Style

Philip Ajibola Bankole; Adeniyi Adewopo. Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change. Int. J. Theor. Appl. Math. 2017, 3(1), 25-29. doi: 10.11648/j.ijtam.20170301.14

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AMA Style

Philip Ajibola Bankole, Adeniyi Adewopo. Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change. Int J Theor Appl Math. 2017;3(1):25-29. doi: 10.11648/j.ijtam.20170301.14

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@article{10.11648/j.ijtam.20170301.14,
  author = {Philip Ajibola Bankole and Adeniyi Adewopo},
  title = {Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change},
  journal = {International Journal of Theoretical and Applied Mathematics},
  volume = {3},
  number = {1},
  pages = {25-29},
  doi = {10.11648/j.ijtam.20170301.14},
  url = {https://doi.org/10.11648/j.ijtam.20170301.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijtam.20170301.14},
  abstract = {This paper focuses on Numéraire change technique for pricing financial assets with stochastic interest rate. It makes sense to introduce the notion of stochastic interest rate when dealing with long term option pricing problems rather than constant interest rate addressed in the past by most papers. We consider the application of Numéraire Change technique to pricing of Investor’s Savings Plan (ISP) with swaption between two interest rates, inflation and exchange rates of two different countries. The result shows that it is better to incorporate stochastic interest rate into long term option pricing problems and Numéraire technique is better applied if faced with several risks factors.},
 year = {2017}
}

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TY  - JOUR
T1  - Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change
AU  - Philip Ajibola Bankole
AU  - Adeniyi Adewopo
Y1  - 2017/01/07
PY  - 2017
N1  - https://doi.org/10.11648/j.ijtam.20170301.14
DO  - 10.11648/j.ijtam.20170301.14
T2  - International Journal of Theoretical and Applied Mathematics
JF  - International Journal of Theoretical and Applied Mathematics
JO  - International Journal of Theoretical and Applied Mathematics
SP  - 25
EP  - 29
PB  - Science Publishing Group
SN  - 2575-5080
UR  - https://doi.org/10.11648/j.ijtam.20170301.14
AB  - This paper focuses on Numéraire change technique for pricing financial assets with stochastic interest rate. It makes sense to introduce the notion of stochastic interest rate when dealing with long term option pricing problems rather than constant interest rate addressed in the past by most papers. We consider the application of Numéraire Change technique to pricing of Investor’s Savings Plan (ISP) with swaption between two interest rates, inflation and exchange rates of two different countries. The result shows that it is better to incorporate stochastic interest rate into long term option pricing problems and Numéraire technique is better applied if faced with several risks factors.
VL  - 3
IS  - 1
ER  -

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Author Information

Philip Ajibola Bankole

Department of Mathematics, University of Ibadan, Ibadan, Nigeria
Adeniyi Adewopo

Department of Physics, Adeniran Ogunsanya College of Education, Oto/Ijanikin, Nigeria

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APA Style

Philip Ajibola Bankole, Adeniyi Adewopo. (2017). Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change. International Journal of Theoretical and Applied Mathematics, 3(1), 25-29. https://doi.org/10.11648/j.ijtam.20170301.14

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ACS Style

Philip Ajibola Bankole; Adeniyi Adewopo. Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change. Int. J. Theor. Appl. Math. 2017, 3(1), 25-29. doi: 10.11648/j.ijtam.20170301.14

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AMA Style

Philip Ajibola Bankole, Adeniyi Adewopo. Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change. Int J Theor Appl Math. 2017;3(1):25-29. doi: 10.11648/j.ijtam.20170301.14

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@article{10.11648/j.ijtam.20170301.14,
  author = {Philip Ajibola Bankole and Adeniyi Adewopo},
  title = {Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change},
  journal = {International Journal of Theoretical and Applied Mathematics},
  volume = {3},
  number = {1},
  pages = {25-29},
  doi = {10.11648/j.ijtam.20170301.14},
  url = {https://doi.org/10.11648/j.ijtam.20170301.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijtam.20170301.14},
  abstract = {This paper focuses on Numéraire change technique for pricing financial assets with stochastic interest rate. It makes sense to introduce the notion of stochastic interest rate when dealing with long term option pricing problems rather than constant interest rate addressed in the past by most papers. We consider the application of Numéraire Change technique to pricing of Investor’s Savings Plan (ISP) with swaption between two interest rates, inflation and exchange rates of two different countries. The result shows that it is better to incorporate stochastic interest rate into long term option pricing problems and Numéraire technique is better applied if faced with several risks factors.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Mathematical Modeling of Investors’ Savings Plan (ISP) with Stochastic Interest Rate via Numéraire Change
AU  - Philip Ajibola Bankole
AU  - Adeniyi Adewopo
Y1  - 2017/01/07
PY  - 2017
N1  - https://doi.org/10.11648/j.ijtam.20170301.14
DO  - 10.11648/j.ijtam.20170301.14
T2  - International Journal of Theoretical and Applied Mathematics
JF  - International Journal of Theoretical and Applied Mathematics
JO  - International Journal of Theoretical and Applied Mathematics
SP  - 25
EP  - 29
PB  - Science Publishing Group
SN  - 2575-5080
UR  - https://doi.org/10.11648/j.ijtam.20170301.14
AB  - This paper focuses on Numéraire change technique for pricing financial assets with stochastic interest rate. It makes sense to introduce the notion of stochastic interest rate when dealing with long term option pricing problems rather than constant interest rate addressed in the past by most papers. We consider the application of Numéraire Change technique to pricing of Investor’s Savings Plan (ISP) with swaption between two interest rates, inflation and exchange rates of two different countries. The result shows that it is better to incorporate stochastic interest rate into long term option pricing problems and Numéraire technique is better applied if faced with several risks factors.
VL  - 3
IS  - 1
ER  -

Copy | Download