Bond markets where prices are driven by a general marked point process
We 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.
|Date of creation:||Dec 1995|
|Date of revision:|
|Publication status:||Published in Mathematical Finance, 1997, pages 211-239.|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
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- Robert Jarrow & Dilip B. Madan, 1999. "Hedging contingent claims on semimartingales," Finance and Stochastics, Springer, vol. 3(1), pages 111-134.
- Robert A. Jarrow, 2009. "The Term Structure of Interest Rates," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 69-96, November.
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