Term Structure Models with Parallel and Proportional Shifts

Frederik Armerin, Tomas Björk, Bjarne Astrup Jensen

Research output: Working paperResearch

185 Downloads (Pure)


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.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherInstitut for Finansiering, Copenhagen Business School
Number of pages18
ISBN (Print)8790705963
Publication statusPublished - 2005
SeriesWorking Papers / Department of Finance. Copenhagen Business School


  • Bond market
  • Term structure of interest rates
  • Flat term structures

Cite this