Research Online

Logo

Goldsmiths - University of London

Theory of Cryptocurrency Interest Rates

Brody, Dorje C.; Hughston, Lane P. and Meister, Bernhard K.. 2019. Theory of Cryptocurrency Interest Rates. SIAM Journal for Financial Mathematics, ISSN 1945-497X [Article] (Forthcoming)

[img]
Preview
Text
Brody Hughston Meister 2019.pdf - Accepted Version
Available under License Creative Commons Attribution Non-commercial.

Download (445kB) | Preview

Abstract or Description

A term structure model in which the short rate is zero is developed as a candidate for a theory of cryptocurrency interest rates. The price processes of crypto discount bonds are worked out, along with expressions for the instantaneous forward rates and the prices of interest-rate derivatives. The model admits functional degrees of freedom that can be calibrated to the initial yield curve and other market data. Our analysis suggests that strict local martingales can be used for modelling the pricing kernels associated with virtual currencies based on distributed ledger technologies.

Item Type:

Article

Additional Information:

Accepted version available at ArXiv:1904.05472v3 https://arxiv.org/abs/1904.05472

Keywords:

cryptocurrencies, distributed ledger technologies, blockchains, interest rate models, pricing kernels, foreign exchange, derivatives

Departments, Centres and Research Units:

Computing

Dates:

DateEvent
17 December 2019Accepted

Item ID:

28114

Date Deposited:

23 Jan 2020 09:33

Last Modified:

23 Jan 2020 14:05

Peer Reviewed:

Yes, this version has been peer-reviewed.

URI:

http://research.gold.ac.uk/id/eprint/28114

View statistics for this item...

Edit Record Edit Record (login required)