Long-Term Yield in an Affine HJM Framework on Sd+
30 Pages Posted: 25 Jun 2015
Date Written: June 6, 2014
We develop the HJM framework for forward rates driven by affine processes on the state space of symmetric positive semidefinite matrices. In this setting we find an explicit representation for the long-term yield in terms of the model parameters. This generalises the results of El Karoui et al. (1997) and Biagini and Härtel (2014), where the long-term yield is investigated under no-arbitrage assumptions in a HJM setting using Brownian motions and Lévy processes respectively.
Keywords: HJM, Affine Process, Long-Term Yield, Yield Curve, Wishart Process.
JEL Classification: G12, G13
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