Bond markets where prices are driven by a general marked point process
AbstractWe investigate the term structure for the case when interest rates are allowed to be driven by a general marked point process as well as by a Wiener process. Developing a theory which allows for measure-valued trading portfolios we study existence and uniqueness of a martingale measure, as well as completeness of the bond market. We also give sufficient conditions for the existence of an affine term structure. Developing the appropriate forward measures we give formulas for interest rate derivatives.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 88.
Length: 64 pages
Date of creation: Dec 1995
Date of revision:
Publication status: Published in Mathematical Finance, 1997, pages 211-239.
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More information through EDIRC
Term structure of interest rates; arbitrage; bond markets; interest rates; martingales; jump processes; completeness; affine term structure;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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