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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)

Brody Hughston Meister 2019.pdf - Accepted Version
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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.

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Additional Information:

Accepted version available at ArXiv:1904.05472v3


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

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17 December 2019Accepted

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Date Deposited:

23 Jan 2020 09:33

Last Modified:

23 Jan 2020 14:05

Peer Reviewed:

Yes, this version has been peer-reviewed.


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