The Term Structure of Interest Rates under Regime Shifts and Jumps
This paper develops a tractable dynamic term structure models under jump-diffusion and regime shifts with time varying transition probabilities. The model allows for regime-dependent jumps while both jump risk and regime-switching risk are priced. Closed form solution for the term structure is obtained for an ane-type model under loglinear approximation.
|Date of creation:||Oct 2005|
|Date of revision:||Oct 2005|
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