Term structure models driven by Wiener processes and Poisson measures: existence and positivity

DOI10.1137/090758593MaRDI QIDQ3580036zbMATH OpenOpenAlexFDO

Authors Damir Filipović, Stefan Tappe, Josef Teichmann

Publication date 11 August 2010

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

Full work available at URL https://arxiv.org/abs/0905.1413

zbMATH Keywords

existenceforward curvesHilbert spaceMusiela parametrization,infinite dimensional Wiener processPoisson random measurepositivity preservingterm structure models

Mathematics Subject Classification ID

Stochastic partial differential equations (aspects of stochastic analysis) (60H15) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Abstract: In the spirit of Bj"ork-DiMasi-Kabanov-Runggaldier, we investigate term structure models driven by Wiener process and Poisson measures with forward curve dependent volatilities. This includes a full existence and uniqueness proof for the corresponding Heath--Jarrow--Morton type term structure equation. Furthermore, we characterize positivity preserving models by means of the characteristic coefficients, which was open for jump-diffusions. Additionally we treat existence, uniqueness and positivity of the Brody-Hughston equation of interest rate theory with jumps, an equation which we believe to be very useful for applications. A key role in our investigation is played by the method of the moving frame, which allows to transform the Heath--Jarrow--Morton--Musiela equation to a time-dependent SDE.

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Cited in

(37)

• On the mild Itô formula in Banach spaces
• Tangent Lévy market models
• Forward rate models with linear volatilities
• Stochastic evolution equations in Banach spaces and applications to the Heath-Jarrow-Morton-Musiela equations
• Some refinements of existence results for SPDEs driven by Wiener processes and Poisson random measures
• Infinite-dimensional polynomial processes
• On a class of stochastic partial differential equations with multiple invariant measures
• Lévy-Ito models in finance
• Singular perturbations and asymptotic expansions for SPDEs with an application to term structure models
• Forward invariance and Wong-Zakai approximation for stochastic moving boundary problems
• Construction of a class of forward performance processes in stochastic factor models, and an extension of Widder's theorem
• Exponential moments for numerical approximations of stochastic partial differential equations
• Compact embeddings for spaces of forward rate curves
• Alpha-CIR model with branching processes in sovereign interest rate modeling
• Itô formula for mild solutions of SPDEs with Gaussian and non-Gaussian noise and applications to stability properties
• Invariance of closed convex cones for stochastic partial differential equations
• On a Heath-Jarrow-Morton approach for stock options
• Monotonicity of the collateralized debt obligations term structure model
• A general HJM framework for multiple yield curve modelling
• Iterative algorithms for computing the feedback Nash equilibrium point for positive systems
• Rational term structure models with geometric Lévy martingales
• A note on real-world and risk-neutral dynamics for Heath-Jarrow-Morton frameworks
• Kernel-correlated Lévy field driven forward rate and application to derivative pricing
• Representation of infinite-dimensional forward price models in commodity markets
• Bond and option pricing for interest rate model with clustering effects
• Stochastic mortality models: an infinite-dimensional approach
• On CIR Equations with General Factors
• CONDITIONAL DENSITY MODELS FOR ASSET PRICING
• Credit Derivatives Pricing Based on Lévy Field Driven Term Structure
• Stationary covariance regime for affine stochastic covariance models in Hilbert spaces
• Affine processes are regular
• Invariant cones for jump-diffusions in infinite dimensions
• Dynamically consistent analysis of realized covariations in term structure models
• Positivity of mild solutions to stochastic evolution equations with an application to forward rates
• Heath-Jarrow-Morton-Musiela equation with Lévy perturbation
• Exponential moment bounds and strong convergence rates for tamed-truncated numerical approximations of stochastic convolutions
• Existence of Lévy term structure models

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