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Affine Processes and Application in Finance

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  • D. Duffie
  • D. Filipovic
  • W. Schachermayer

Abstract

We provide the definition and a complete characterization of regular affine processes. This type of process unifies the concepts of continuousstate branching processes with immigration and Ornstein-Uhlenbeck type processes. We show, and provide foundations for, a wide range of financial applications for regular affine processes.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0281.

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Date of creation: Sep 2002
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Handle: RePEc:nbr:nberte:0281

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References

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  1. Jarrow, Robert A & Lando, David & Turnbull, Stuart M, 1997. "A Markov Model for the Term Structure of Credit Risk Spreads," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 481-523.
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  8. Goldstein, Robert S, 2000. "The Term Structure of Interest Rates as a Random Field," Review of Financial Studies, Society for Financial Studies, vol. 13(2), pages 365-84.
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  10. Pierluigi Balduzzi & Sanjiv Ranjan Das & Silverio Foresi, 1997. "The Central Tendency: A Second Factor in Bond Yields," NBER Working Papers 6325, National Bureau of Economic Research, Inc.
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  15. Duffie, Darrell & Singleton, Kenneth J, 1999. "Modeling Term Structures of Defaultable Bonds," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 687-720.
  16. Pearson, N.D. & Sun, T.S., 1991. "An Empirical Examination of the Cox, Ingersoll and Ross Model of the Term Structure of Interest Rates," Papers fb-24, Columbia - Graduate School of Business.
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Cited by:
  1. Massoud Heidari & Liuren Wu, 2002. "Term Structure of Interest Rates, Yield Curve Residuals, and the Consistent Pricing of Interest Rates and Interest Rate Derivatives," Finance 0207010, EconWPA, revised 05 Sep 2002.
  2. Abel Elizalde, 2006. "Credit Risk Models I: Default Correlation In Intensity Models," Working Papers wp2006_0605, CEMFI.
  3. Sergei LevendorskiĬ, 2006. "Consistency conditions for affine term structure models," Annals of Finance, Springer, vol. 2(2), pages 207-224, March.
  4. Sergei Levendorskii, 2004. "Consistency conditions for affine term structure models," Econometric Society 2004 North American Winter Meetings 413, Econometric Society.

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