On arbitrage and Markovian short rates in fractional bond markets
AbstractWe study a bond market model and related term structure of interest rates driven by a fractional Brownian motion with self-similarity parameter H[set membership, variant](1/2,1). We present a criterion on the deterministic forward rate volatility under which the short rate process is Markovian and construct an admissible self-financing portfolio realizing an arbitrage opportunity.
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Bibliographic InfoArticle provided by Elsevier in its journal Statistics & Probability Letters.
Volume (Year): 70 (2004)
Issue (Month): 3 (December)
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Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/622892/description#description
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