Classes of Interest Rate Models Under the HJM Framework
Although the HJM term structure model is widely accepted as the most general and perhaps the most consistent, framework under which to study interest rate derivatives, the earlier models of Vasicek, Cox-Ingersoll-Ross, Hull-White, and Black-Karasinki remain popuar among both academics and practitioners. It is often stated that these models are special cases of the HJM framework, but the precise links have not been fully established in the literature. By beginning with certain forward rate volatility processes, it is possible to obtain classes of interest model under the HJM framework that closely resemble the traditional models listed above. Further, greater insight into the dyanmics of the interest rate process emerges as a result of natural links being established between the model parameters and maret observed variables.
|Date of creation:||01 Aug 1999|
|Publication status:||Published as: Chaierlla, C. and Kwon, O., 2001, "Classes of Interest Rate Models Under the HJM Framework", Asia-Pacific Financial Markets, 8(1), 1-22.|
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- R. Bhar & C. Chiarella, 1997.
"Transformation of Heath?Jarrow?Morton models to Markovian systems,"
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- David Heath & Robert Jarrow & Andrew Morton, 2008.
"Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation,"
World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305
World Scientific Publishing Co. Pte. Ltd..
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
- Peter Ritchken & L. Sankarasubramanian, 1995. "Volatility Structures Of Forward Rates And The Dynamics Of The Term Structure," Mathematical Finance, Wiley Blackwell, vol. 5(1), pages 55-72. Full references (including those not matched with items on IDEAS)
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