Unifying Gaussian Dynamic Term Structure Models from an HJM Perspective

32 Pages Posted: 4 Aug 2016

See all articles by Haitao Li

Haitao Li

Cheung Kong Graduate School of Business

Xiaoxia Ye

University of Liverpool Management School

Fan Yu

Claremont McKenna College - Robert Day School of Economics and Finance

Date Written: August 2, 2016

Abstract

We show that the unified HJM-based approach of constructing Gaussian dynamic term structure models developed by Li, Ye, and Yu (2016) nests most existing GDTSMs as special cases. We also discuss issues of interest rate derivatives pricing under this approach and using integration to construct Markov representations of HJM models.

Keywords: Gaussian Dynamic Term Structure Models, HJM, Finite Dimensional Realizations, Interest Rate Derivatives

JEL Classification: C61, E43, E44, G12

Suggested Citation

Li, Haitao and Ye, Xiaoxia and Yu, Fan, Unifying Gaussian Dynamic Term Structure Models from an HJM Perspective (August 2, 2016). Claremont McKenna College Robert Day School of Economics and Finance Research Paper No. 2817599. Available at SSRN: https://ssrn.com/abstract=2817599 or http://dx.doi.org/10.2139/ssrn.2817599

Haitao Li

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

Xiaoxia Ye (Contact Author)

University of Liverpool Management School ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

Fan Yu

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
(909)607-3345 (Phone)

HOME PAGE: http://www.cmc.edu/academic/faculty/profile.asp?Fac=553

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