Markovian term structure models in discrete time (Q1872398): Difference between revisions

Markovian term structure models in discrete time and with continuous state space are studied. More precisely, there are discussed the structural properties of such models if one has the Markov property for a part of the forward curve. The authors investigate two cases where these parts are either a true subset of the forward curve, including the short rate, or the entire forward curve. A version of the Heath, Jarrow and Morton drift condition is obtained. Under a Gaussian assumption a Heath-Jarrow-Morton-Musiela type equation is derived.