On arbitrage and Markovian short rates in fractional bond markets
A bond market model and related term structure of interest rates driven by a fractional Brownian motion with self-similarity parameter \(H \in (1/2, 1)\) are studied. A criterion on the deterministic forward rate volatility under which the short rate process is Markovian is presented and an admissible self-financing portfolio realizing an arbitrage opportunity is constructed.
scientific article; zbMATH DE number 2142315
scientific article