What is the natural scale for a L\'evy process in modelling term structure of interest rates?

Jiro Akahori () and Takahiro Tsuchiya

Papers from arXiv.org

Abstract: This paper gives examples of explicit arbitrage-free term structure models with L\'evy jumps via state price density approach. By generalizing quadratic Gaussian models, it is found that the probability density function of a L\'evy process is a "natural" scale for the process to be the state variable of a market.

Date: 2006-12
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Journal Article: What is the Natural Scale for a Lévy Process in Modelling Term Structure of Interest Rates? (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:arx:papers:math/0612341

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