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| Author: | Jarrow, R. Yildirim, Y. |
| Title: | Pricing treasury inflation protected securities and related derivatives using an HJM model |
| Journal: | Journal of Financial and Quantitative Analysis
2003 : JUN, VOL. 38:2, p. 337-358 |
| Index terms: | Derivative securities Pricing Treasury bills |
| Language: | eng |
| Abstract: | An HJM model is used to price TIPS and related derivative securities. Both the real and nominal zero-coupon bond price curves using TIPS and ordinary U.S. Treasury securities are obtained using standard coupon bond price stripping procedures. Next, a three-factor arbitrage-free term structure model is fit to the time-series evolutions of the CPI-U and the real and nominal zero-coupon bond price curves. Then, the validity of the HJM model for pricing TIPS is confirmed via its hedging performance by using the estimated term structure parameters. |
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