Invariant measures for the Musiela equation with deterministic diffusion term

DOI10.1007/S007800050072MaRDI QIDQ1979074zbMATH OpenOpenAlexFDO

Authors Tiziano Vargiolu

Publication date 24 May 2000

Published in Finance and Stochastics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s007800050072

zbMATH Keywords

interest ratesinvariant measuresmild solutionSobolev spacestochastic partial differential equation

Mathematics Subject Classification ID

Stochastic partial differential equations (aspects of stochastic analysis) (60H15) Applications of stochastic analysis (to PDEs, etc.) (60H30) Applications of statistics to actuarial sciences and financial mathematics (62P05) Stochastic models in economics (91B70)

Review text

This paper deals with the Musiela forward rates equation in the Gaussian case, i.e. the stochastic partial differential equation \[ dr(t,x)=\left({{\partial}\over{\partial x}} r(t,x)+\sum_{n=1}^k \tau_n(t,x) \int_0^x \tau_n(t,u) du\right)dt+ \sum_{n=1}^k \tau_n(t,x) dW_t^n, \] where \(r(t,x)\) is an instantaneous forward rate at time \(t\), \(\tau_n(t,x)\) are \({\mathcal F_t}\)-measurable random fields, and \(W_t\) is a Brownian motion adapted to \({\mathcal F_t}.\) This equation is studied in the Sobolev spaces \(H_{\gamma}^1(\mathbb R^+)\), \(\gamma>0\), and \(H^1(\mathbb R^+)\). For each of the spaces explicit solutions are found. Conditions of existence and uniqueness of invariant measures are given.

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Cited in

(12)

• Stochastic evolution equations in Banach spaces and applications to the Heath-Jarrow-Morton-Musiela equations
• Singular perturbations and asymptotic expansions for SPDEs with an application to term structure models
• A Wiener Chaos Approach to Hyperbolic SPDEs
• Invariant measure for the Vasicek interest rate model in the Heath-Jarrow-Morton-Musiela framework
• LOCAL WELL-POSEDNESS OF MUSIELA’S SPDE WITH LÉVY NOISE
• Mean reversion for HJMM forward rate models
• Sensitivity with respect to the yield curve: duration in a stochastic setting
• A stochastic control problem with delay arising in a pension fund model
• Approximation and application of the Musiela stochastic PDE in forward rate models
• A stochastic model of economic growth in time-space
• Well-posedness and invariant measures for HJM models with deterministic volatility and Lévy noise
• Dynamically consistent analysis of realized covariations in term structure models

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