Interest Rate Theory and Geometry
Portugaliae Mathematica, Vol. 67, No. 3, pp. 321-367, 2010
43 Pages Posted: 10 Dec 2010
Date Written: 2010
In this paper we provide an overview of some basic topics in interest rate theory, from the point of view of arbitrage free pricing. We cover short rate models, affine term structure models, inversion of the yield curve and the Musiela parameterization. We treat geometric interest rate theory in some detail, and we also review the potential approach to positive interest rates.
Keywords: Interest Rate Models, Arbitrage Theory, Stochastic Processes, Martingales,PDEs, ODEs, Manifolds, Potentials, Finite Dimensional Realizations
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