On the construction of finite dimensional realizations for nonlinear forward rate models (Q1409832): Difference between revisions
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Latest revision as of 18:06, 19 March 2024
scientific article
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | On the construction of finite dimensional realizations for nonlinear forward rate models |
scientific article |
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On the construction of finite dimensional realizations for nonlinear forward rate models (English)
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22 October 2003
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Heath-Jarrow-Morton type interest rate models are considered in which the forward rates are driven by a multidimensional Wiener process and the volatility structure is a smooth functional of the present forward rate curve. A general method of finite-dimensional Markovian state space realization (FDR) construction is described. The method is illustrated by the construction of FDR for deterministic direction volatilities model of the form \(\sigma(r,x)=\varphi(r)\lambda(x)\) or \(\sigma(r,t,x)= \sum\varphi_j(r,t)\lambda_j(t,x)\) for time varying systems.
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HJM model
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factor model
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forward rate
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state space model
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Markov process
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