A Class of Jump-Diffusion Bond Pricing Models within the HJM Framework

Carl Chiarella and Christina Nikitopoulos-Sklibosios ()

No 132, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: This paper considers a class of term structure models that is a parameterisation of the Shirakawa (1991) extension of the Heath, Jarrow and Morton (1992) model to the case of jump-diffusions. We consider specific forward rate volatility structures that incorporate state dependent Wiener volatility functions and time dependent Poisson volatility functions. Within this framework, we discuss the Markovianisation issue, and obtain the corresponding affine term structure of interest rates. As a result we are able to obtain a broad tractable class of jump-diffusion term structure models. We relate our approach to the existing class of jump-diffusion term structure models whose starting point is a jump-diffusion process for the spot rate. In particular we obtain natural jump-diffusion versions of the Hull and White (1990, 1994) one-factor and two-factor models and the Ritchken and Sankarasubramanian (1995) model within the HJM framework. We also give some numerical simulations to gauge the effect of the jump-component on yield curves and the implications of various volatility specifications for the spot rate distributions.

Keywords: Markovian HJM model, jump-diffusions; state dependent volatility (search for similar items in EconPapers)
Pages: 38 pages
Date: 2004-09-01
New Economics Papers: this item is included in nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as: Chiarella, C. and Nikitopoulos-Sklibosios, C., 2003, "A Class of Jump-Diffusion Bond Pricing Models within the HJM Framework", Asia-Pacific Financial Markets, 10(2), 87-127.

Downloads: (external link)
http://www.qfrc.uts.edu.au/research/research_papers/rp132.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.qfrc.uts.edu.au/research/research_papers/rp132.pdf [301 Moved Permanently]--> http://www.uts.edu.au/node/51831 [301 Moved Permanently]--> https://www.uts.edu.au/node/51831)

Related works:
Journal Article: A Class of Jump-Diffusion Bond Pricing Models within the HJM Framework (2003)
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:uts:rpaper:132

Access Statistics for this paper

More papers in Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Duncan Ford ().