WHEN IS THE SHORT RATE MARKOVIAN?

1994199 citationsJournal Article

Authors

Andrew Carverhill · Hong Kong University of Science and Technology

Abstract

We answer this question in the very general context of the n‐factor Heath, Jarrow, and Morton model for the evolution of the term structure of interest rates, with nonrandom volatility. the answer is that a constraint is imposed on the behavior of the volatility structure. We explain the importance of this result for the design of efficient numerical algorithms for the valuation of options on the term structure.

Topics & Keywords

Stochastic processes and financial applications Economic theories and models Insurance, Mortality, Demography, Risk Management

Publication Details

Published in: Mathematical Finance

Volume 4, Issue 4, pp. 305-312

DOI: 10.1111/j.1467-9965.1994.tb00060.x

Field-Weighted Citation Impact: 13.59

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WHEN IS THE SHORT RATE MARKOVIAN?

Authors

Abstract

Topics & Keywords

Publication Details