Markovian Defaultable HJM Term Structure Models with Unspanned Stochastic Volatility

Carl Chiarella, Samuel Chege Maina and Christina Nikitopoulos-Sklibosios ()

No 283, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: This paper presents a class of defaultable term structure models within the HJM framework with stochastic volatility. Under certain volatility specifications, the model admits finite dimensional Markovian structures and consequently provides tractable solutions for interest rate derivatives. We also investigate the effect of stochastic volatility and of correlation between the stochastic volatility and credit spreads on the defaultable short rate and defaultable bond prices.

Keywords: Stochastic volatility; Heath-Jarrow-Morton model; defaultable forward rates; credit spreads (search for similar items in EconPapers)
Pages: 40 pages
Date: 2010-08-01
New Economics Papers: this item is included in nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.uts.edu.au/sites/default/files/qfr-archive-03/QFR-rp283.pdf (application/pdf)

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:uts:rpaper:283

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 ().