Exponential moments for HJM models with jumps (Q1003342)

Let \(P(t,\theta), t\in [0,\theta]\), be the market price of a bond paying 1 at the maturity time \(\theta\), and the forward rate curve be a function \(f(t,\theta)\) such that \(P(t,\theta)=\exp(-\int_t^{\theta} f(t,s)\,ds)\). The paper deals with the general Heath-Jarrow-Morton (HJM) model for the forward curves of the form \(df(t,\theta)=a(t,\theta)dt+\langle\sigma(t\theta),dZ(t)\rangle, 0\leq t\leq \theta\), driven by a general Lévy process \(Z(t)\) with values in a separable Hilbert space. Necessary moment conditions for the discount bond prices to be local martingales are derived. Under these conditions, it is proved that the discounted bond prices are local martingales if and only if the drift coefficients satisfy a generalized HJM-type condition formulated in terms of the logarithm of the moment generating function of the process \(Z\). The existence of the strong exponential moments is discussed.