Term Structure Models with Parallel and Proportional Shifts

Frederik Armerin, Tomas Björk, Bjarne Astrup Jensen

Publikation: Working paperForskning

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Abstrakt

We investigate the possibility of an arbitrage free model for the term structure of interest rates where the yield curve only changes through a parallel shift. We consider HJM type forward rate models driven by a multidimensional Wiener process as well as by a general marked point process. Within this general framework we show that there does indeed exist a large variety of nontrivial parallel shift term structure models, and we also describe these in detail. We also show that there exists no nontrivial flat term structure model. The same analysis is repeated for the similar case, where the yield curve only changes through proportional shifts.
OriginalsprogEngelsk
Udgivelses stedFrederiksberg
UdgiverInstitut for Finansiering, Copenhagen Business School
Antal sider18
ISBN (Trykt)8790705963
StatusUdgivet - 2005
NavnWorking Papers / Department of Finance. Copenhagen Business School
Nummer2005-5
ISSN0903-0352

Emneord

  • Bond market
  • term structure of interest r
  • Flat term structures

Citationsformater

Armerin, F., Björk, T., & Astrup Jensen, B. (2005). Term Structure Models with Parallel and Proportional Shifts. Institut for Finansiering, Copenhagen Business School. Working Papers / Department of Finance. Copenhagen Business School, Nr. 2005-5