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Term Structure Models with Parallel and Proportional Shifts
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.).
Copenhagen Business School.
Stockholm School of Economics.
2007 (English)In: Applied Mathematical Finance, ISSN 1350-486X, E-ISSN 1466-4313, Vol. 14, no 3, 243-260 p.Article in journal (Refereed) Published
Abstract [en]

    We investigate the possibility of an arbitrage free model for the term structure of in-terest rates where the yield curve only changes through a parallel shift. We consider HJMtype forward rate models driven by a multidimensional Wiener process as well as by a gen-eral marked point process. Within this general framework we show that there does indeedexist a large variety of nontrivial parallel shift term structure models, and we also describethese in detail. We also show that there exists no nontrivial flat term structure model. Thesame analysis is repeated for the similar case, where the yield curve only changes throughproportional shifts.

Place, publisher, year, edition, pages
2007. Vol. 14, no 3, 243-260 p.
Keyword [en]
bond market, term structure of interest rates, flat term structures.
National Category
Economics and Business Mathematics
URN: urn:nbn:se:kth:diva-86592DOI: 10.1080/13504860600858030ScopusID: 2-s2.0-34347233084OAI: diva2:500876
QC 20120228Available from: 2012-02-13 Created: 2012-02-13 Last updated: 2012-02-28Bibliographically approved

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