Bond Markets Where Prices are Driven by a General Marked Point Process

WPS88-12/95

Posted: 27 Nov 1996

See all articles by Tomas Bjork

Tomas Bjork

Stockholm School of Economics - Swedish House of Finance

Youri Kabanov

Universite de Franche-Comte; Russian Academy of Sciences (RAS) - Central Economics and Mathematics Institute

Comte W. Runggaldier

Universita de Padova

Date Written: November 1995

Abstract

We investigate the term structure for the case when interest rates are allowed to be driven by a general marked point process as well as by a Wiener process. Developing a theory which allows for measure-valued trading portfolios we study existence and uniqueness of a martingale measure, as well as completeness of the bond market. We also give sufficient conditions for the existence of an affine term structure. Developing the appropriate forward measures we give formulas for interest rate derivatives.

JEL Classification: G12, G13

Suggested Citation

Bjork, Tomas and Kabanov, Youri and Runggaldier, Comte W., Bond Markets Where Prices are Driven by a General Marked Point Process (November 1995). WPS88-12/95. Available at SSRN: https://ssrn.com/abstract=7937

Tomas Bjork (Contact Author)

Stockholm School of Economics - Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Youri Kabanov

Universite de Franche-Comte ( email )

16 Route de Gray
Besancon Cedex, F-25030
France

Russian Academy of Sciences (RAS) - Central Economics and Mathematics Institute

47, Nakhimovsky prospect
Moscow, 117418
Russia

Comte W. Runggaldier

Universita de Padova ( email )

Via Belzoni 7
Padova, 35100
ITALY

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