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Bond markets where prices are driven by a general marked point process

Author

Listed:
  • Björk, T.

    (Department of Finance)

  • Kabanov, Y.

    (Laboratoire de Mathematiques)

  • Runggaldier, W.

    (Dipartimento di Matematica Pura e Applicata)

Abstract

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.

Suggested Citation

  • Björk, T. & Kabanov, Y. & Runggaldier, W., 1995. "Bond markets where prices are driven by a general marked point process," SSE/EFI Working Paper Series in Economics and Finance 88, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0088
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    References listed on IDEAS

    as
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    6. John C. Cox & Jonathan E. Ingersoll Jr. & Stephen A. Ross, 2005. "A Theory Of The Term Structure Of Interest Rates," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 5, pages 129-164, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Philipp J. Schonbucher, 1997. "Team Structure Modelling of Defaultable Bonds," FMG Discussion Papers dp272, Financial Markets Group.
    2. C. Mancini, 2002. "The European options hedge perfectly in a Poisson-Gaussian stock market model," Applied Mathematical Finance, Taylor & Francis Journals, vol. 9(2), pages 87-102.
    3. Vilimir Yordanov, 2012. "The Bulgarian Foreign and Domestic Debt ??? A No-Arbitrage Macrofinancial View," William Davidson Institute Working Papers Series wp1032, William Davidson Institute at the University of Michigan.

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    More about this item

    Keywords

    Term structure of interest rates; arbitrage; bond markets; interest rates; martingales; jump processes; completeness; affine term structure;
    All these keywords.

    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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