On arbitrage and Markovian short rates in fractional bond markets

Pavel V. Gapeev

Statistics & Probability Letters, 2004, vol. 70, issue 3, 211-222

Abstract: We study a bond market model and related term structure of interest rates driven by a fractional Brownian motion with self-similarity parameter H[set membership, variant](1/2,1). We present a criterion on the deterministic forward rate volatility under which the short rate process is Markovian and construct an admissible self-financing portfolio realizing an arbitrage opportunity.

Keywords: Bond; market; model; Term; structure; of; interest; rates; Heath-Jarrow-Morton; approach; Fractional; Brownian; motion; Fundamental; martingale; Prediction; formula; Average; risk; neutral; measure; Pathwise; stochastic; integration; Arbitrage; opportunity (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-7152(04)00258-5
Full text for ScienceDirect subscribers only

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:eee:stapro:v:70:y:2004:i:3:p:211-222

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Statistics & Probability Letters is currently edited by Somnath Datta and Hira L. Koul

More articles in Statistics & Probability Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().