A general characterization of one factor affine term structure models

Damir Filipovic ()
Additional contact information
Damir Filipovic: Department of Mathematics, ETH, CH-8092 Zurich, Switzerland Manusript

Finance and Stochastics, 2001, vol. 5, issue 3, 389-412

Abstract: We give a complete characterization of affine term structure models based on a general nonnegative Markov short rate process. This applies to the classical CIR model but includes as well short rate processes with jumps. We provide a link to the theory of branching processes and show how CBI-processes naturally enter the field of term structure modelling. Using Markov semigroup theory we exploit the full structure behind an affine term structure model and provide a deeper understanding of some well-known properties of the CIR model. Based on these fundamental results we construct a new short rate model with jumps, which extends the CIR model and still gives closed form expressions for bond options.

Keywords: Affine Term Structure Models; CBI-Processes; Infinitely Decomposable Processes; Non-continuous Markovian Short Rates (search for similar items in EconPapers)
JEL-codes: E43 (search for similar items in EconPapers)
Date: 2001-07-12
Note: received: June 2000, final version received: October 2000
References: Add references at CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://link.springer.de/link/service/journals/00780/papers/1005003/10050389.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

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:spr:finsto:v:5:y:2001:i:3:p:389-412

Ordering information: This journal article can be ordered from
http://www.springer. ... ance/journal/780/PS2

Access Statistics for this article

Finance and Stochastics is currently edited by M. Schweizer

More articles in Finance and Stochastics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().