Positive Interest Rate Model in the Presence of Jumps

초록

HJM representation of the term structure of interest rates sometimes produces the negative interest rates with positive probability. This paper shows that the condition of positive interest rates can be derived from the jump difusion process, if a proper positive martingale process with the compensated jump process is chosen. As in Flesaker and Hughston, the condition is incorporated into the bond price process.

키워드