Working within the Heath-Jarrow-Morton framework and using the theory of stochastic equations in infinite dimensions, a useful multifactor Gauss-Markov model for the movement of the whole of the yield curve is derived. Swaptions are priced. They are hedged by eliminating random terms between the...

A class of term structure models with volatility of lognormal type is analyzed in the general HJM framework. The corresponding market forward rates do not explode, and are positive and mean reverting. Pricing of caps and floors is consistent with the Black formulas used in the market. Swaptions...

The note deals with the pricing of American options related to foreign market equities. the form of the early exercise premium representation of the American option's price in a stochastic interest rate economy is established. Subsequently, the American fixed exchange rate foreign equity option...

A new approach to modeling credit risk, to valuation of defaultable debt and to pricing of credit derivatives is developed. Our approach, based on the Heath, Jarrow, and Morton (1992) methodology, uses the available information about the credit spreads combined with the available information...

The time evolution of a sliding bond is studied in discrete‐ and continuous‐time setups. By definition, a sliding bond represents the price process of a discount bond with a fixed time to maturity. Examples of measure‐valued trading strategies (introduced by Bj"ork et al. 1997a, 1997b) which are...