Forward rate dependent Markovian transformations of the Heath-Jarrow-Morton term structure model

Carl Chiarella and Oh Kang Kwon ()
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Oh Kang Kwon: School of Finance and Economics, University of Technology Sydney, PO Box 123, Broadway, NSW 2007, Australia ; Manuscript

Finance and Stochastics, 2001, vol. 5, issue 2, 237-257

Abstract: In this paper, a class of forward rate dependent Markovian transformations of the Heath-Jarrow-Morton [16] term structure model are obtained by considering volatility processes that are solutions of linear ordinary differential equations. These transformations generalise the Markovian systems obtained by Carverhill [8], Ritchken and Sankarasubramanian [20], Bhar and Chiarella [1], and Inui and Kijima [18], and also generalise the bond price formulae obtained therein.

Keywords: Heath-Jarrow-Morton model; Markovian transformations; term structure of interest rates; bond price (search for similar items in EconPapers)
JEL-codes: E43 G12 G13 (search for similar items in EconPapers)
Date: 2001-04-10
Note: received: April 1999; final version received: March 2000
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Citations: View citations in EconPapers (33)

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Working Paper: Forward Rate Dependent Markovian Transformations of the Heath-Jarrow-Morton Term Structure Model (1999)
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