Advanced Search
MyIDEAS: Login to save this paper or follow this series

Term Structure Models with Parallel and Proportional Shifts

Contents:

Author Info

  • Armerin, Frederik

    ()
    (Department of Mathematics)

  • Björk, Tomas

    ()
    (Department of Finance,)

  • Jensen, Bjarne Astrup

    ()
    (Department of Finance, Copenhagen Business School)

Registered author(s):

    Abstract

    We investigate the possibility of an arbitrage free model for the term structure of interest rates where the yield curve only changes through a parallel shift. We consider HJM type forward rate models driven by a multidimensionalWiener process as well as by a general marked point process. Within this general framework we show that there does indeed exist a large variety of nontrivial parallel shift term structure models, and we also describe these in detail. We also show that there exists no nontrivial flat term structure model. The same analysis is repeated for the similar case, where the yield curve only changes through proportional shifts.

    Download Info

    If 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.
    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7137
    Download Restriction: no

    Bibliographic Info

    Paper provided by Copenhagen Business School, Department of Finance in its series Working Papers with number 2005-5.

    as in new window
    Length: 23 pages
    Date of creation: 26 Oct 2005
    Date of revision:
    Publication status: Published in Applied Mathematical Finance , 2007, pages 243-260.
    Handle: RePEc:hhs:cbsfin:2005_005

    Note: Forthcoming in Applied Mathematical Finance
    Contact details of provider:
    Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark
    Phone: +45 3815 3815
    Email:
    Web page: http://www.cbs.dk/departments/finance/
    More information through EDIRC

    Related research

    Keywords: bond market; term structure of interest rates; flat term structures;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Tomas Björk & Yuri Kabanov & Wolfgang Runggaldier, 1997. "Bond Market Structure in the Presence of Marked Point Processes," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 211-239.
    2. Tomas Björk & Bent Jesper Christensen, 1999. "Interest Rate Dynamics and Consistent Forward Rate Curves," Mathematical Finance, Wiley Blackwell, vol. 9(4), pages 323-348.
    3. Fisher, Lawrence & Weil, Roman L, 1971. "Coping with the Risk of Interest-Rate Fluctuations: Returns to Bondholders from Naive and Optimal Strategies," The Journal of Business, University of Chicago Press, vol. 44(4), pages 408-31, October.
    4. Ingersoll, Jonathan E. & Skelton, Jeffrey & Weil, Roman L., 1978. "Duration Forty Years Later," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(04), pages 627-650, November.
    5. 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.
    6. Montrucchio, Luigi & Peccati, Lorenzo, 1991. "A note on Shiu--Fisher--Weil immunization theorem," Insurance: Mathematics and Economics, Elsevier, vol. 10(2), pages 125-131, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:hhs:cbsfin:2005_005. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lars Nondal).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.