Author(s)

Deng Ding, Qi Fu, Jacky So

aculty of Science and Technology, University of Macau, Macao, China.
Faculty of Business Administration, University of Macau, Macao, China.

In this paper, a Monte Carlo method, which is based on some new simulation techniques proposed recently, is presented to numerically price the callable bond with several call dates and notice under the Cox-Ingersoll-Ross (CIR) interest rate model. The corresponding algorithms are also presented to practical callable bond pricing. The numerical experiments show that this method works very well for callable bond under the CIR interest rate model.

Callable Bond; Monte Carlo Simulation; CIR Model; Embedded Option Pricing

D. Ding, Q. Fu and J. So, "Pricing Callable Bonds Based on Monte Carlo Simulation Techniques," Technology and Investment, Vol. 3 No. 2, 2012, pp. 121-125. doi: 10.4236/ti.2012.32015.