Lévy term structure models: no-arbitrage and completeness (Q1776027)

The term structure models driven by Lévy processes are considered from the point of view of their no-arbitrage property and completeness. The authors take a driving process that is not necessarily a Lévy process but which has independent increments and absolutely continuous characteristics. Its natural name is `non-homogeneous Lévy process'. Classes of equivalent martingale and local martingale measures for various filtrations are characterized. A somewhat surprising result is that in the case of one-dimensional driving process a Black-Scholes type situation arises: there is a unique equivalent martingale measure.