Monotonicity of the collateralized debt obligations term structure model

DOI10.1080/17442508.2013.879145MaRDI QIDQ2811110zbMATH OpenOpenAlexFDO

Authors Michał Barski

Publication date 10 June 2016

Published in Stochastics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1512.03173

zbMATH Keywords

monotonicitybond marketHJM conditionCDO modelHJMM equation

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Stochastic partial differential equations (aspects of stochastic analysis) (60H15) Credit risk (91G40)

Abstract: The problem of existence of arbitrage free and monotone CDO term structure models is studied. Conditions for positivity and monotonicity of the corresponding Heath-Jarrow-Morton-Musiela equation for the $x$-forward rates with the use of the Milian type result are formulated. Two state spaces are taken into account - of square integrable functions and a Sobolev space. For the first the regularity results concerning pointwise monotonicity are proven. Arbitrage free and monotone models are characterized in terms of the volatility of the model and characteristics of the driving L'evy process.

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Cites work

• scientific article; zbMATH DE number 1402217 (Why is no real title available?)
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• Comparison theorems for stochastic evolution equations
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Cited in

(4)

• Dynamic term structure modelling with default and mortality risk: new results on existence and monotonicity
• Invariant cones for jump-diffusions in infinite dimensions
• CDO term structure modelling with Lévy processes and the relation to market models
• Doubly stochastic CDO term structures

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