An empirical study of the term structure of interest rates

This paper is an empirical study of the Heath-Jarrow-Morton model using Generalized Method of Moments and Simulated Method of Moments on Danish bond and option prices. The paper implements a simulation approach to price contingent claims written on purely interest rate-dependent securities fulfilling the Heath-Jarrow-Morton model. This method implies simulation of solutions of stochastic differential equations since the theoretical pricing model is too complicated to give closed form pricing formulas.Heath-Jarrow-Morton model term structure of interest rates default-free coupon bonds forward rate forward rate process GMM SME implied volatility simulation of SDEs