Statistically consistent term structures have affine geometry

DOI10.1137/23M1611907MaRDI QIDQ6984257zbMATH OpenFDO

Authors Paul Krühner, Shi-Jie Xu

Publication date 14 May 2025

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1137/23M1611907

zbMATH Keywords

affine geometryelectricity futures modelsfinite-dimensional realizationstatistical consistency

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24) Derivative securities (option pricing, hedging, etc.) (91G20) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Review text

Within the framework of finite-dimensional energy futures diffusion models, the authors show that the chosen set of possible yield curves needs to have an affine geometry, to be compatible with the diffusion coefficients.

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