Finite-dimensional realizations of regime-switching HJM models

Elhouar, M

Finite-dimensional realizations of regime-switching HJM models

Elhouar, M

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Publisher:: Routledge
Publication Type:: Journal Article
Citation:: Applied Mathematical Finance, 2008, 15 (4), pp. 331 - 354
Issue Date:: 2008-01

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Field	Value	Language
dc.contributor.author	Elhouar, M	en_US
dc.date.issued	2008-01	en_US
dc.identifier.citation	Applied Mathematical Finance, 2008, 15 (4), pp. 331 - 354	en_US
dc.identifier.issn	1350-486X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/8270
dc.description.abstract	This paper studies Heath-Jarrow-Morton-type models with regime-switching stochastic volatility. In this setting the forward rate volatility is allowed to depend on the current forward rate curve as well as on a continuous time Markov chain y with finitely many states. Employing the framework developed by Bjork and Svensson we find necessary and sufficient conditions on the volatility guaranteeing the representation of the forward rate process by a finite-dimensional Markovian state space model. These conditions allow us to investigate regime-switching generalizations of some well-known models such as those by Ho-Lee, Hull-White, and Cox-Ingersoll-Ross.	en_US
dc.publisher	Routledge	en_US
dc.relation.ispartof	Applied Mathematical Finance	en_US
dc.relation.isbasedon	10.1080/13504860801987133	en_US
dc.subject.classification	Finance	en_US
dc.title	Finite-dimensional realizations of regime-switching HJM models	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	15	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	0103 Numerical and Computational Mathematics	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 Business
utslib.copyright.status	closed_access
pubs.consider-herdc	false	en_US
pubs.issue	4	en_US
pubs.volume	15	en_US

Abstract:

This paper studies Heath-Jarrow-Morton-type models with regime-switching stochastic volatility. In this setting the forward rate volatility is allowed to depend on the current forward rate curve as well as on a continuous time Markov chain y with finitely many states. Employing the framework developed by Bjork and Svensson we find necessary and sufficient conditions on the volatility guaranteeing the representation of the forward rate process by a finite-dimensional Markovian state space model. These conditions allow us to investigate regime-switching generalizations of some well-known models such as those by Ho-Lee, Hull-White, and Cox-Ingersoll-Ross.

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http://hdl.handle.net/10453/8270