Term Structure Models with Parallel and Proportional Shifts
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
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.
bond market, term structure of interest rates, flat term structures.
Economics and Business Mathematics
IdentifiersURN: urn:nbn:se:kth:diva-86592DOI: 10.1080/13504860600858030ScopusID: 2-s2.0-34347233084OAI: oai:DiVA.org:kth-86592DiVA: diva2:500876
QC 201202282012-02-132012-02-132012-02-28Bibliographically approved