WIAS Preprint No. 40, (1993)

On bond price dynamics.


  • Platen, Eckhard
  • Rebolledo, R.

2010 Mathematics Subject Classification

  • 90A09 60G35 60H10


  • Pricing, bonds, stochastic differential equations, martingales




This article proposes a new approach to bond price dynamics. By means of exponential formulae and a notion of forward derivatives we construct a general theoretical framework, which allows to include most of known bond price properties. In particular, we perform a new analysis of no arbitrage conditions together with their consequences on the corresponding return premium. An expression for the general bond price is obtained which also turns out to be computationally convenient. Finally, we specify our result in a general multifactor bond pricing model.

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