BIVARIATE SUPPORT OF FORWARD LIBOR AND SWAP RATES

Farshid Jamshidian

Mathematical Finance, 2008, vol. 18, issue 3, 427-443

Abstract: Based on a certain notion of “prolific process,” we find an explicit expression for the bivariate (topological) support of the solution to a particular class of 2 × 2 stochastic differential equations that includes those of the three‐period “lognormal” Libor and swap market models. This yields that in the lognormal swap market model (SMM), the support of the 1 × 1 forward Libor L*t equals [l*t, ∞) for some semi‐explicit −1 ≤l*t≤ 0, sharpening a result of Davis and Mataix‐Pastor (2007) that forward Libor rates (eventually) become negative with positive probability in the lognormal SMM. We classify the instances l*t

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/j.1467-9965.2008.00340.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:mathfi:v:18:y:2008:i:3:p:427-443

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0960-1627

Access Statistics for this article

Mathematical Finance is currently edited by Jerome Detemple

More articles in Mathematical Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().