A NOTE ON REAL-WORLD AND RISK-NEUTRAL DYNAMICS FOR HEATH–JARROW–MORTON FRAMEWORKS

David Criens ()
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David Criens: Department of Mathematics, Technical University of Munich, Munich 80333, Germany

International Journal of Theoretical and Applied Finance (IJTAF), 2020, vol. 23, issue 03, 1-17

Abstract: We show that for time-inhomogeneous Markovian Heath–Jarrow–Morton models driven by an infinite-dimensional Brownian motion and a Poisson random measure an equivalent change of measure exists whenever the real-world and the risk-neutral dynamics can be defined uniquely and are related via a drift and a jump condition.

Keywords: Heath–Jarrow–Morton framework; Lévy term structure models; real-world dynamics; risk-neutral dynamics; stochastic partial differential equations; change of measure (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S021902492050020X

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