Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56297
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dc.contributor.authorBjörk, Tomasen_US
dc.date.accessioned2012-03-28T13:09:34Z-
dc.date.available2012-03-28T13:09:34Z-
dc.date.issued2003en_US
dc.identifier.urihttp://hdl.handle.net/10419/56297-
dc.description.abstractIn this paper, which is a substantial extension of the earlier essay Björk (2001), we give an overview of some recent work on the geometric properties of the evolution of the forward rate curve in an arbitrage free bond market. The main problems to be discussed are as follows. 1. When is a given forward rate model consistent with a given family of forward rate curves? 2. When can the inherently infinite dimensional forward rate process be realized by means of a Markovian finite dimensional state space model. We consider interest rate models of Heath-Jarrow-Morton type, where the forward rates are driven by a multidimensional Wiener process, and where he volatility is allowed to be an arbitrary smooth functional of the present forward rate curve. Within this framework we give necessary and sufficient conditions for consistency, as well as for the existence of a finite dimensional realization, in terms of the forward rate volatilities. We also study stochastic volatility HJM models, and we provide a systematic method for the construction of concrete realizations.en_US
dc.language.isoengen_US
dc.publisher|aEkonomiska Forskningsinst. |cStockholmen_US
dc.relation.ispartofseries|aSSE/EFI Working Paper Series in Economics and Finance |x545en_US
dc.subject.jelE43en_US
dc.subject.jelG13en_US
dc.subject.ddc330en_US
dc.subject.keywordForward rate curvesen_US
dc.subject.keywordinterest rate modelsen_US
dc.subject.keywordfactor modelsen_US
dc.subject.keywordstate space modelsen_US
dc.subject.keywordMarkovian realizationsen_US
dc.subject.stwMarkovscher Prozessen_US
dc.subject.stwZinsstrukturtheorieen_US
dc.subject.stwZinsstrukturtheorieen_US
dc.titleOn the geometry of interest rate modelsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn374126542en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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