The Relationship Between Risk and Maturity In A Stochastic Setting

Published

Journal Article

This paper explores the interest rate sensitivity of the prices of bonds and other securities when the instantaneous interest rate follows a Markov process. We show that whenever the interest rate describes a diffusion process the sensitivity of zero‐coupon bonds increases with maturity. More generally, we characterize the risk‐maturity relationship for contingent claims. This investigation yields a new property of option prices in the case where the underlying security price is a diffusion. Copyright © 1992, Wiley Blackwell. All rights reserved

Full Text

Duke Authors

Cited Authors

  • Zipkin, PH

Published Date

  • January 1, 1992

Published In

Volume / Issue

  • 2 / 1

Start / End Page

  • 33 - 46

Electronic International Standard Serial Number (EISSN)

  • 1467-9965

International Standard Serial Number (ISSN)

  • 0960-1627

Digital Object Identifier (DOI)

  • 10.1111/j.1467-9965.1992.tb00024.x

Citation Source

  • Scopus