A Class of Heath-Jarrow-Morton Term Structure Models with Stochastic Volatility
This paper considers a class of Heath-Jarrow-Morton term structure models with stochastic volatility. These models admit transformations to Markovian systems, and consequently lend themselves to well-established solution techniques for the bond and bond option prices. Solutions for certain special cases are obtained, and compared against their non-stochastic counterparts.
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Working Paper Series
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Research Paper Series
5, Quantitative Finance Research Centre, University of Technology, Sydney.
- Carl Chiarella & Oh Kang Kwon, 2001. "Forward rate dependent Markovian transformations of the Heath-Jarrow-Morton term structure model," Finance and Stochastics, Springer, vol. 5(2), pages 237-257.
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