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http://hdl.handle.net/10419/56361
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| Title: | | Finite dimensional Markovian realizations for stochastic volatility forward rate models  |
| Authors: | | Björk, Tomas Landén, Camilla Svensson, Lars |
| Issue Date: | | 2002 |
| Series/Report no.: | | SSE/EFI Working Paper Series in Economics and Finance 498 |
| Abstract: | | We consider forward rate rate models of HJM type, as well as more general infinite dimensional SDEs, where the volatility/diffusion term is stochastic in the sense of being driven by a separate hidden Markov process. Within this framework we use the previously developed Hilbert space realization theory in order provide general necessary and sufficent conditions for the existence of a finite dimensional Markovian realizations for the stochastic volatility models. We illustrate the theory by analyzing a number of concrete examples. |
| Subjects: | | HJM models stochastic volatility factor models forward rates state space models Markovian realizations infinite dimensional SDEs |
| JEL: | | E43 G13 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics
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