Explosion in the quasi-Gaussian HJM model

被引：0

作者：

Dan Pirjol

Lingjiong Zhu

机构：

[1] J. P. Morgan,Department of Mathematics

[2] Florida State University,undefined

来源：

Finance and Stochastics | 2018年 / 22卷

关键词：

HJM model; Stochastic modeling; Multidimensional diffusions; Explosion; 60J60; 60J70; 91G30; 93D30; C32; C63; C65;

D O I：

暂无

中图分类号：

学科分类号：

摘要：

We study the explosion of the solutions of the SDE in the quasi-Gaussian HJM model with a CEV-type volatility. The quasi-Gaussian HJM models are a popular approach for modeling the dynamics of the yield curve. This is due to their low-dimensional Markovian representation which simplifies their numerical implementation and simulation. We show rigorously that the short rate in these models explodes in finite time with positive probability, under certain assumptions for the model parameters, and that the explosion occurs in finite time with probability one under some stronger assumptions. We discuss the implications of these results for the pricing of the zero coupon bonds and Eurodollar futures under this model.

引用

页码：643 / 666

页数：23

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