One-Factor Term Structure without Forward Rates

Victor Goodman and Kyounghee Kim

Papers from arXiv.org

Abstract: We construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all nominal interest rates remain positive in the model. We give examples where our model does not have a spot rate; other examples include both spot and forward rates.

Date: 2006-12, Revised 2006-12
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:math/0612035

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