A Heat Kernel Approach to Interest Rate Models
AbstractWe construct default-free interest rate models in the spirit of the well-known Markov funcional models: our focus is analytic tractability of the models and generality of the approach. We work in the setting of state price densities and construct models by means of the so called propagation property. The propagation property can be found implicitly in all of the popular state price density approaches, in particular heat kernels share the propagation property (wherefrom we deduced the name of the approach). As a related matter, an interesting property of heat kernels is presented, too.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 0910.5033.
Date of creation: Oct 2009
Date of revision:
Contact details of provider:
Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-31 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joanne Kennedy & Phil Hunt & Antoon Pelsser, 2000. "Markov-functional interest rate models," Finance and Stochastics, Springer, vol. 4(4), pages 391-408.
- L. C. G. Rogers, 1997. "The Potential Approach to the Term Structure of Interest Rates and Foreign Exchange Rates," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 157-176.
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
- M. R. Grasselli & T. R. Hurd, 2003. "Wiener Chaos and the Cox-Ingersoll-Ross model," Papers math/0307197, arXiv.org.
- Andrea Macrina & Priyanka A. Parbhoo, 2011. "Randomised Mixture Models for Pricing Kernels," Papers 1112.2059, arXiv.org.
- Jirô Akahori & Andrea Macrina, 2012.
"Heat Kernel Interest Rate Models With Time-Inhomogeneous Markov Processes,"
International Journal of Theoretical and Applied Finance (IJTAF),
World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1250007-1-1.
- Jiro Akahori & Andrea Macrina, 2010. "Heat Kernel Interest Rate Models with Time-Inhomogeneous Markov Processes," Papers 1012.1878, arXiv.org.
- Andrea Macrina, 2012. "Heat Kernel Framework for Asset Pricing in Finite Time," Papers 1211.0856, arXiv.org, revised Sep 2013.
- Andrea Macrina & Priyanka A. Parbhoo, 2010. "Security Pricing with Information-Sensitive Discounting," Papers 1001.3570, arXiv.org, revised Jun 2010.
- Andrea Macrina & Priyanka A. Parbhoo, 2010. "Securities Pricing with Information-Sensitive Discounting," KIER Working Papers 695, Kyoto University, Institute of Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).
If references are entirely missing, you can add them using this form.