{'fraction_non_alphanumeric': 0.02142051860202931, 'fraction_numerical': 0.0, 'mean_word_length': 5.297872340425532, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
A regime-switching model to evaluate bonds in a quadratic term structure of interest rates

In this article, we consider a discrete-time economy in which we assume that the short-term interest rate follows a quadratic term structure in a regime-switching asset process. The possible nonlinear structure and the fact that the interest rate can have different economic or financial trends justify regime-switching quadratic term structure model. Indeed, this regime-switching process depends on the values of a Markov chain with a time-dependent transition probability matrix which can capture the different states (regimes) of the economy. We prove that under this model, the conditional zero-coupon bond price admits a quadratic term structure. Moreover, the stochastic coefficients which appear in this decomposition satisfy an explicit system of coupled stochastic backward recursions.