Forward Rate Dependent Markovian Transformations of the Heath-Jarrow-Morton Term Structure Model
In this paper, a class of forward rate dependent Markovian transformations of the Heth-Jarrow-Morton [HJM92] term structure model are obtained by considering volatility processes that are solutions of linear ordinary differential equations. These transformations generalise the Markovian system obtained by Carverhill [Car94], Ritchken and Sankarasubramanian [RS95], Bhar and Chiarella [BC97], and Inui and Kijima [IK98], and also generalise the bond price formulae obtained therin.
|Date of creation:||01 Apr 1999|
|Publication status:||Published as: Chiarella, C. and Kwon, O., 2001, "Forward Rate Dependent Markovian Transformations of the Heath-Jarrow-Morton Term Structure Model?", Finance and Stochastics, 5(2), 237-257.|
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Working Paper Series
53, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
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- Björk, Tomas & Svensson, Lars, 1999. "On the Existence of Finite Dimensional Realizations for Nonlinear Forward Rate Models," SSE/EFI Working Paper Series in Economics and Finance 338, Stockholm School of Economics.
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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..
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