Consistency problems for Heath-Jarrow-Morton interest rate models
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Bond markets differ in one fundamental aspect from standard stock markets. While the latter are built up to a finite number of trade assets, the underlying basis of a bond market is the entire term structure of interest rates: an infinite-dimensional variable which is not directly observable. On the empirical side, this necessitates curve-fitting methods for the daily estimation of the term structure. Pricing models, on the other hand, are usually built upon stochastic factors representing the term structure in a finite-dimensional state space. Written for readers with knowledge in mathematical finance (in particular interest rate theory) and elementary stochastic analysis, this research monograph has threefold aims: to bring together estimation methods and factor models for interest rates, to provide appropriate consistency conditions and to explore some important examples.
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Consistency problems for Heath-Jarrow-Morton interest rate models, Damir Filipovic
- Language
- Released
- 2001
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- Title
- Consistency problems for Heath-Jarrow-Morton interest rate models
- Language
- English
- Authors
- Damir Filipovic
- Publisher
- Springer
- Released
- 2001
- ISBN10
- 3540414932
- ISBN13
- 9783540414933
- Series
- Lecture notes in mathematics
- Category
- Technology / Engineering
- Description
- Bond markets differ in one fundamental aspect from standard stock markets. While the latter are built up to a finite number of trade assets, the underlying basis of a bond market is the entire term structure of interest rates: an infinite-dimensional variable which is not directly observable. On the empirical side, this necessitates curve-fitting methods for the daily estimation of the term structure. Pricing models, on the other hand, are usually built upon stochastic factors representing the term structure in a finite-dimensional state space. Written for readers with knowledge in mathematical finance (in particular interest rate theory) and elementary stochastic analysis, this research monograph has threefold aims: to bring together estimation methods and factor models for interest rates, to provide appropriate consistency conditions and to explore some important examples.