What is the natural scale for a L\'evy process in modelling term structure of interest rates?
AbstractThis paper gives examples of explicit arbitrage-free term structure models with L\'evy jumps via state price density approach. By generalizing quadratic Gaussian models, it is found that the probability density function of a L\'evy process is a "natural" scale for the process to be the state variable of a market.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number math/0612341.
Date of creation: Dec 2006
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- Jirô Akahori & Takahiro Tsuchiya, 2006. "What is the Natural Scale for a Lévy Process in Modelling Term Structure of Interest Rates?," Asia-Pacific Financial Markets, Springer, vol. 13(4), pages 299-313, December.
- 91B - - - - - -
- 60G - - - - - -
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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