Application of statistical mechanics methodology to term-structure bond-pricing models

  • Authors:

  • Lester Ingber;Michael F. Wehner;George M. Jabbour;Theodore M. Barnhill

  • Affiliations:

  • Science Transfer Corporation P.O. Box 857, McLean, VA 22101, U.S.A. and Department of Mathematics, The George Washington University Washington, DC 20052 USA;B Division, Lawrence Livermore Laboratory Livermore, CA 94550, U.S.A.;Department of Business Administration, The George Washington University Washington, DC 20052, U.S.A.;Department of Business Administration, The George Washington University Washington, DC 20052, U.S.A.

  • Venue:
  • Mathematical and Computer Modelling: An International Journal
  • Year:
  • 1991

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Abstract

Recent work in statistical mechanics has developed new analytical and numerical techniques to solve coupled stochastic equations. This paper applies the very fast simulated re-annealing and path-integral methodologies to the estimation of the Brennan and Schwartz two-factor term structure model. It is shown that these methodologies can be utilized to estimate more complicated n-factor nonlinear models.