Implied savings accounts are unique (Q5926475): Difference between revisions

This paper resolves a problem raised by the theory of interest rates for general term structure models. Fix a time horizon \(T'\) and denote for each \(T\leq T'\) by \(B(t,T)\) the price at time \(t\leq T\) of a zero coupon bond with maturity \(T.\) An implied savings account with respect to \(Q\) is called a strictly positive predictible process \(A\) of finite variation for the term structure model \(B\) if we have \(B(t,T)=E^{Q}[\frac{A_{t}}{A_{T}}\mid\mathcal{F}_{t}]\), \(0\leq t\leq T\leq T'\), for some \(Q\) equivalent to the original probability measure. The authors solve the uniqueness problem for an implied savings account: can there be another pair \((A', Q')\) generating \(B\)? It is proved that if \((A',Q')\) is another pair with the same properties, then \(A\) and \(A'\) are indistinguishable. This extends a result given by \textit{M. Musiela} and \textit{M. Rutkowski} [ibid. 1, No. 4, 261-291 (1997; Zbl 0888.60037)] who considered the case of Brownian filtration and fills a gap in their arguments.