When Is The Short Rate Markovian?
We answer this question in the very general context of the n-factor Heath, Jarrow, and Morton model for the evolution of the term structure of interest rates, with nonrandom volatility. the answer is that a constraint is imposed on the behavior of the volatility structure. We explain the importance of this result for the design of efficient numerical algorithms for the valuation of options on the term structure. Copyright 1994 Blackwell Publishers.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 4 (1994)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0960-1627|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0960-1627|
- Ram Bhar & Carl Chiarella, 1995. "The Estimation of the Heath-Jarrow-Morton Model by Use of Kalman Filtering Techniques," Working Paper Series 54, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
- Munk, Claus & Sorensen, Carsten, 2004.
"Optimal consumption and investment strategies with stochastic interest rates,"
Journal of Banking & Finance,
Elsevier, vol. 28(8), pages 1987-2013, August.
- Sørensen, Carsten & Munk, Claus, 2001. "Optimal Consumption and Investment Strategies with Stochastic Interest Rates," Working Papers 2000-9, Copenhagen Business School, Department of Finance.
- Casassus, Jaime & Collin-Dufresne, Pierre & Goldstein, Bob, 2005. "Unspanned stochastic volatility and fixed income derivatives pricing," Journal of Banking & Finance, Elsevier, vol. 29(11), pages 2723-2749, November.
- Carl Chiarella & Oh Kwon, 2003. "Finite Dimensional Affine Realisations of HJM Models in Terms of Forward Rates and Yields," Review of Derivatives Research, Springer, vol. 6(2), pages 129-155, May.
- Gapeev, Pavel V., 2004. "On arbitrage and Markovian short rates in fractional bond markets," Statistics & Probability Letters, Elsevier, vol. 70(3), pages 211-222, December.
- Secomandi, Nicola & Seppi, Duane J., 2014. "Real Options and Merchant Operations of Energy and Other Commodities," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 6(3-4), pages 161-331, July.
- Christina Nikitopoulos-Sklibosios, 2005. "A Class of Markovian Models for the Term Structure of Interest Rates Under Jump-Diffusions," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 6, December.
- Ram Bhar & Carl Chiarella, 2000. "Approximating Heath-Jarrow-Morton Non-Markovian Term Structure of Interest Rate Models with Markovian Systems," Working Paper Series 76, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
- Dai, Qiang & Singleton, Kenneth J., 2003. "Fixed-income pricing," Handbook of the Economics of Finance,in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 20, pages 1207-1246 Elsevier.
- R. Bhar & C. Chiarella, 1997. "Transformation of Heath?Jarrow?Morton models to Markovian systems," The European Journal of Finance, Taylor & Francis Journals, vol. 3(1), pages 1-26.
- Ram Bhar & Carl Chiarella, 1995. "Transformation of Heath-Jarrow-Morton Models to Markovian Systems," Working Paper Series 53, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
- Carl Chiarella & Oh-Kang Kwon, 2000. "A Complete Stochastic Volatility Model in the HJM Framework," Research Paper Series 43, Quantitative Finance Research Centre, University of Technology, Sydney.
- Thompson, Matt, 2016. "Natural gas storage valuation, optimization, market and credit risk management," Journal of Commodity Markets, Elsevier, vol. 2(1), pages 26-44.
- Carl Chiarella & Nadima El-Hassan, 1999. "Pricing American Interest Rate Options in a Heath-Jarrow-Morton Framework Using Method of Lines," Research Paper Series 12, Quantitative Finance Research Centre, University of Technology, Sydney.
- Chiarella, Carl & Hung, Hing & T, Thuy-Duong, 2009. "The volatility structure of the fixed income market under the HJM framework: A nonlinear filtering approach," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 2075-2088, April.
- Carl Chiarella & Hing Hung & Thuy-Duong To, 2005. "The Volatility Structure of the Fixed Income Market under the HJM Framework: A Nonlinear Filtering Approach," Research Paper Series 151, Quantitative Finance Research Centre, University of Technology, Sydney.
- Haitao Li & Xiaoxia Ye, 2013. "A Type of HJM Based Affine Model: Theory and Empirical Evidence," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
- Biagini, Francesca & Fink, Holger & Klüppelberg, Claudia, 2013. "A fractional credit model with long range dependent default rate," Stochastic Processes and their Applications, Elsevier, vol. 123(4), pages 1319-1347.
- Falini, Jury, 2010. "Pricing caps with HJM models: The benefits of humped volatility," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1358-1367, December.
- Ramaprasad Bhar & Carl Chiarella, 1997. "Interest rate futures: estimation of volatility parameters in an arbitrage-free framework," Applied Mathematical Finance, Taylor & Francis Journals, vol. 4(4), pages 181-199.
- Ram Bhar & Carl Chiarella, 1995. "Interest Rate Futures: Estimation of Volatility Parameters in an Arbitrage-Free Framework," Working Paper Series 55, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
- Carl Chiarella & Nadima El-Hassan, 1997. "Evaluation of Derivative Security Prices in the Heath-Jarrow-Morton Framework as Path Integrals Using Fast Fourier Transform Techniques," Working Paper Series 72, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
- Gapeev, Pavel V. & Küchler, Uwe, 2003. "On Markovian Short Rates in Term Structure Models Driven by Jump-Diffusion Processes," SFB 373 Discussion Papers 2003,44, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
When requesting a correction, please mention this item's handle: RePEc:bla:mathfi:v:4:y:1994:i:4:p:305-312. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
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.
Follow series, journals, authors & more
New papers by email
Subscribe to new additions to RePEc
Public profiles for Economics researchers
Various rankings of research in Economics & related fields
Who was a student of whom, using RePEc
Curated articles & papers on various economics topics
Upload your paper to be listed on RePEc and IDEAS
Blog aggregator for economics research
Cases of plagiarism in Economics
Job Market Papers
RePEc working paper series dedicated to the job market
Pretend you are at the helm of an economics department
Services from the StL Fed
Data, research, apps & more from the St. Louis Fed