Consistency Problems for Heath-Jarrow-Morton Interest Rate Models (Lecture Notes in Mathematics)

Damir Filipovic

ISBN 10: 3540414932 / ISBN 13: 9783540414933

Editore: Springer Berlin Heidelberg 2008-10-10, 2008

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Dati bibliografici

• Titolo: Consistency Problems for Heath-Jarrow-Morton Interest Rate Models (Lecture Notes in Mathematics)
• Editore: Springer Berlin Heidelberg 2008-10-10
• Data di pubblicazione: 2008
• Lingua: Inglese
• ISBN 10: 3540414932
• ISBN 13: 9783540414933
• Rilegatura: Paperback
• Condizione: New

Descrizione articolo

Riassunto

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.

Dalla quarta di copertina

The book is written for a reader with knowledge in mathematical finance (in particular interest rate theory) and elementary stochastic analysis, such as provided by Revuz and Yor (Continuous Martingales and Brownian Motion, Springer 1991). It gives a short introduction both to interest rate theory and to stochastic equations in infinite dimension. The main topic is the Heath-Jarrow-Morton (HJM) methodology for the modelling of interest rates. Experts in SDE in infinite dimension with interest in applications will find here the rigorous derivation of the popular "Musiela equation" (referred to in the book as HJMM equation). The convenient interpretation of the classical HJM set-up (with all the no-arbitrage considerations) within the semigroup framework of Da Prato and Zabczyk (Stochastic Equations in Infinite Dimensions) is provided. One of the principal objectives of the author is the characterization of finite-dimensional invariant manifolds, an issue that turns out to be vital for applications. Finally, general stochastic viability and invariance results, which can (and hopefully will) be applied directly to other fields, are described.