A general characterization of one factor affine term structure models
This paper deals with the characterization of the class of all non-negative Markov short rate processes \(r\) which yield an affine term structure. For any time homogeneous progressively measurable Markov process \(r\) on \(\mathbb{R}_{+}\), which satisfies the condition \(\int_{0}^{t}r_{s} ds<\infty\) a.s. for all \(t\), assuming affine term structure, the authors show, using Markov semigroup theory, that \(r\) is necessarily a Feller process with the generator \[ Af(x)=\alpha xf(x)+(b'+\beta x)f'(x)+ \int_{\mathbb{R}_{+}}^{0} (f(x+y)-f(x)-f'(x)(1\wedge y))(m(dy)+x\mu(dy)). \] Such processes are known as conservative CBI-processes (continuous state branching processes with immigration). The authors establish a one-to-one correspondence between the class of conservative CBI-processes and Markov short rate processes implying an affine term structure. Using the pricing semigroup \[ Q_{t}f(x)={\mathbf E} \left[ \exp\Biggl\{-\int_{0}^{t}r_{s} ds\Biggr\} f(r_{t})|r_0=x\right], \] the authors obtain closed form expressions for all European claims \(f(r_{t})\). The non-continuous short rate model which extends the classical CIR model is considered and closed form expressions for European bond option prices are given. In the multifactor case, however, affine term structure does not longer imply affinity of the underlying Markovian factors. The corresponding counter example is presented.
- Affine processes and applications in finance
- Asymptotic properties of maximum likelihood estimator for the growth rate for a jump-type CIR process based on continuous time observations
- Markovian term structure models in discrete time
- Multiple yield curve modelling with CBI processes
- Closed-form formulas for conditional moments of inhomogeneous Pearson diffusion processes
- Analytical formula for conditional expectations of path-dependent product of polynomial and exponential functions of extended Cox-Ingersoll-Ross process
- Alpha-CIR model with branching processes in sovereign interest rate modeling
- Holomorphic transforms with application to affine processes
- Endogenous current coupons
- Time-changed CIR default intensities with two-sided mean-reverting jumps
- Forward-backward SDEs and the CIR model
- Affine realizations with affine state processes for stochastic partial differential equations
- Positive Harris recurrence and exponential ergodicity of the basic affine jump-diffusion
- Exponential ergodicity of the jump-diffusion CIR process
- Positive eigenfunctions of Markovian pricing operators: Hansen-Scheinkman factorization, Ross recovery, and long-term pricing
- Multivariate subordination of Markov processes with financial applications
- Moment explosions and long-term behavior of affine stochastic volatility models
- Valuation of asset and volatility derivatives using decoupled time-changed Lévy processes
- Pricing measures, forward measures and semigroups
- Pricing of Catastrophe Insurance Options Under Immediate Loss Reestimation
- A tractable LIBOR model with default risk
- SEPARABLE TERM STRUCTURES AND THE MAXIMAL DEGREE PROBLEM
- scientific article; zbMATH DE number 1971725 (Why is no real title available?)
- Orthogonal expansions for VIX options under affine jump diffusions
- Bond and option pricing for interest rate model with clustering effects
- Option pricing in a one-dimensional affine term structure model via spectral representations
- AFFINE PROCESSES, ARBITRAGE-FREE TERM STRUCTURES OF LEGENDRE POLYNOMIALS, AND OPTION PRICING
- AFFINE LATTICE MODELS
- Jump diffusion transition intensities in life insurance and disability annuity
- Is the variance swap rate affine in the spot variance? Evidence from S\&P500 data
- Moments and ergodicity of the jump-diffusion CIR process
- On CIR Equations with General Factors
- Nonaffine models of yield term structure
- Clustering effects via Hawkes processes
- Real-world jump-diffusion term structure models
- Inference for option panels in pure-jump settings
- A "COHERENT STATE TRANSFORM" APPROACH TO DERIVATIVE PRICING
- A characterization of the martingale property of exponentially affine processes
- Estimation for discretely observed continuous state branching processes with immigration
- Asymptotic properties of maximum likelihood estimator for the growth rate of a stable CIR process based on continuous time observations
- Pricing swaps and options on quadratic variation under stochastic time change models -- discrete observations case
- Well-posedness of a system of SDEs driven by jump random measures
- The Alpha‐Heston stochastic volatility model
- CBI-time-changed Lévy processes
- A self-exciting modeling framework for forward prices in power markets
- The rough Hawkes Heston stochastic volatility model
- A stochastic maximum principle for CBI processes
- On the reducibility of affine models with dependent Lévy factors
- Affine term structure models driven by independent Lévy processes
- Variance dynamics: joint evidence from options and high-frequency returns
- Alternative defaultable term structure models
- Yield curve shapes and the asymptotic short rate distribution in affine one-factor models
- A model of discontinuous interest rate behavior, yield curves, and volatility
This page was built for publication: A general characterization of one factor affine term structure models
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q5950467)
