Term structure modeling and asymptotic long rate
This paper examines the dynamics of the asymptotic long rate in three classes of term structure models. It shows that, in a frictionless and arbitrage-free market, the asymptotic long rate is a non-decreasing process. This gives an alternative proof of the same result of \textit{P. H. Dybvig, J. E. Ingersol jun.} and \textit{S. A. Ross} [J. Business 69, 1-25 (1996)]. It proves that the asymptotic long rate in factor models with state variables having non-singular diffusion volatility matrices is a deterministic function of time \(t\). This paper also discusses a class of models in which bond prices have closed-form formulas and the asymptotic long rate is a constant.
scientific article; zbMATH DE number 1441564