An alternative approach on the existence of affine realizations for HJM term structure models.

DOI10.1098/RSPA.2009.0493MaRDI QIDQ2997301zbMATH OpenOpenAlexFDO

Authors Stefan Tappe

Publication date 6 May 2011

Published in Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1907.03256, http://rspa.royalsocietypublishing.org/content/vol466/issue2122/

zbMATH Keywords

invariant foliationsRiccati equationsaffine realizationsgeometry of interest rate models

Mathematics Subject Classification ID

Stochastic partial differential equations (aspects of stochastic analysis) (60H15) Infinite-dimensional random dynamical systems; stochastic equations (37L55) Applications of stochastic analysis (to PDEs, etc.) (60H30) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Abstract: We propose an alternative approach on the existence of affine realizations for HJM interest rate models. It is applicable to a wide class of models, and simultaneously it is conceptually rather comprehensible. We also supplement some known existence results for particular volatility structures and provide further insights into the geometry of term structure models.

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Cites work

• Interest rates and information geometry
• On the geometry of the term structure of interest rates

Cited in

(13)

• Wong-Zakai approximations with convergence rate for stochastic partial differential equations
• Affine realizations with affine state processes for stochastic partial differential equations
• Analytical pricing of American put options on a zero coupon bond in the Heath-Jarrow-Morton model
• Representation of infinite-dimensional forward price models in commodity markets
• Foundations of the theory of semilinear stochastic partial differential equations
• Analysis of the Heath, Jarrow and Morton models (HJM)
• Real-world forward rate dynamics with affine realizations
• Viability for coupled SDEs driven by fractional Brownian motion
• Approximation of forward curve models in commodity markets with arbitrage-free finite-dimensional models
• THE CARMA INTEREST RATE MODEL
• Invariance of closed convex cones for stochastic partial differential equations
• Optimal portfolios in commodity futures markets
• Existence of affine realizations for Lévy term structure models

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