A Classification of Two Factor Affine Diffusion Term Structure Models

Christian Gourieroux and Razvan Sufana
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Razvan Sufana: Crest

No 2005-42, Working Papers from Center for Research in Economics and Statistics

Abstract: Dai, Singleton (2000) introduced a typology of affine diffusion models when the domain ofadmissible values of the factors is an intersection of half planes and under some additional constraintson the parameters. This condition on the domain and the additional sufficient constraintsare restrictive and can considerably diminish the practical interest of affine models. In this paperwe successfully address the research agenda sketched by Duffie, Filipovic, Schachermayer (2003),Section 12.2, p. 50. A systematic investigation is performed and our paper provides a completetypology in the two factor case, without prior restrictions on the domain and on the parameters.

Pages: 30
Date: 2005
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Related works:
Journal Article: A Classification of Two-Factor Affine Diffusion Term Structure Models (2006)
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