On arbitrage and Markovian short rates in fractional bond markets (Q1767760)
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scientific article; zbMATH DE number 2142315
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| English | On arbitrage and Markovian short rates in fractional bond markets |
scientific article; zbMATH DE number 2142315 |
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On arbitrage and Markovian short rates in fractional bond markets (English)
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8 March 2005
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A bond market model and related term structure of interest rates driven by a fractional Brownian motion with self-similarity parameter \(H \in (1/2, 1)\) are studied. A criterion on the deterministic forward rate volatility under which the short rate process is Markovian is presented and an admissible self-financing portfolio realizing an arbitrage opportunity is constructed.
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Bond market model
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term structure of interest rates
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Heath-Jarrow-Morton approach
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fractional Brownian motion
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fundamental martingale
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prediction formula
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average risk neutral measure
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pathwise stochastic integration
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arbitrage opportunity
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0.8407965898513794
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0.8302366137504578
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0.8120523691177368
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