On the construction of finite dimensional realizations for nonlinear forward rate models
type: Item
instance of: scholarly article
title: On the construction of finite dimensional realizations for nonlinear forward rate models
zbMATH Open document ID: 1026.60084
author: Tomas Björk
author: Camilla Landén
published in: Finance and Stochastics
publication date: 2003-10-22T00:00:00Z
review text: Heath-Jarrow-Morton type interest rate models are considered in which the forward rates are driven by a multidimensional Wiener process and the volatility structure is a smooth functional of the present forward rate curve. A general method of finite-dimensional Markovian state space realization (FDR) construction is described. The method is illustrated by the construction of FDR for deterministic direction volatilities model of the form \(\sigma(r,x)=\varphi(r)\lambda(x)\) or \(\sigma(r,t,x)= \sum\varphi_j(r,t)\lambda_j(t,x)\) for time varying systems.
Mathematics Subject Classification ID: 60H30
Mathematics Subject Classification ID: 91B28
zbMATH DE Number: 1995766
zbMATH Keywords: HJM model
zbMATH Keywords: factor model
zbMATH Keywords: forward rate
zbMATH Keywords: state space model
zbMATH Keywords: Markov process
MaRDI profile type: Publication
full work available at URL: s007800100060
OpenAlex ID: W1525566855
DOI: 10.1007/S007800100060
description: scientific article; zbMATH DE number 1995766