Real-World Forward Rate Dynamics With Affine Realizations

Platen, E; Tappe, S

Real-World Forward Rate Dynamics With Affine Realizations

Platen, E

Tappe, S

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Publication Type:: Journal Article
Citation:: Stochastic Analysis and Applications, 2015, 33 (4), pp. 573 - 608
Issue Date:: 2015-01-01

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Field	Value	Language
dc.contributor.author	Platen, E https://orcid.org/0000-0003-4595-3123	en_US
dc.contributor.author	Tappe, S	en_US
dc.date.issued	2015-01-01	en_US
dc.identifier.citation	Stochastic Analysis and Applications, 2015, 33 (4), pp. 573 - 608	en_US
dc.identifier.issn	0736-2994	en_US
dc.identifier.uri	http://hdl.handle.net/10453/36536
dc.description.abstract	© 2015, Taylor & Francis Group, LLC. We investigate the existence of affine realizations for Lévy driven interest rate term structure models under the real-world probability measure, which so far has only been studied under an assumed risk-neutral probability measure. For models driven by Wiener processes, all results obtained under the risk-neutral approach concerning the existence of affine realizations are transferred to the general case. A similar result holds true for models driven by compound Poisson processes with finite jump size distributions. However, in the presence of jumps with infinite activity we obtain severe restrictions on the structure of the market price of risk; typically, it must even be constant.	en_US
dc.relation.ispartof	Stochastic Analysis and Applications	en_US
dc.relation.isbasedon	10.1080/07362994.2015.1019629	en_US
dc.subject.classification	Statistics & Probability	en_US
dc.title	Real-World Forward Rate Dynamics With Affine Realizations	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	33	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	0104 Statistics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Science
pubs.organisational-group	/University of Technology Sydney/Faculty of Science/School of Mathematical and Physical Sciences
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.issue	4	en_US
pubs.publication-status	Published	en_US
pubs.volume	33	en_US

Abstract:

© 2015, Taylor & Francis Group, LLC. We investigate the existence of affine realizations for Lévy driven interest rate term structure models under the real-world probability measure, which so far has only been studied under an assumed risk-neutral probability measure. For models driven by Wiener processes, all results obtained under the risk-neutral approach concerning the existence of affine realizations are transferred to the general case. A similar result holds true for models driven by compound Poisson processes with finite jump size distributions. However, in the presence of jumps with infinite activity we obtain severe restrictions on the structure of the market price of risk; typically, it must even be constant.

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http://hdl.handle.net/10453/36536