Long-Term Yield in an Affine HJM Framework on Sd+

30 Pages Posted: 25 Jun 2015

See all articles by Francesca Biagini

Francesca Biagini

University of Bologna - Department of Mathematics

Alessandro Gnoatto

University of Verona - Department of Economics

Maximilian Härtel

Ludwig Maximilian University of Munich (LMU) - Faculty of Mathematics

Date Written: June 6, 2014

Abstract

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

Suggested Citation

Biagini, Francesca and Gnoatto, Alessandro and Härtel, Maximilian, Long-Term Yield in an Affine HJM Framework on Sd+ (June 6, 2014). Available at SSRN: https://ssrn.com/abstract=2622506 or http://dx.doi.org/10.2139/ssrn.2622506

Francesca Biagini

University of Bologna - Department of Mathematics ( email )

Piazzadi Porta San Donato, 5
Bologna, 40126
Italy

Alessandro Gnoatto (Contact Author)

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

Maximilian Härtel

Ludwig Maximilian University of Munich (LMU) - Faculty of Mathematics ( email )

Theresienstrasse 39
Munich
Germany
+49 (0) 89 2180-4198 (Phone)

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