We compare short rate diffusion models with respect to their implications for term structure movements, the plausibility of which serves us as a criterion for evaluating the models. Analytically for Gauss-Markov models and numerically for a broader collection of models prevalent in the...

This article analyzes a broad range of one* and multifactor models of the term structure of interest rates. We assess the influence of the choice of factor probability distributions on the term structure shapes the models generate, and use spread options as an aggregate measure of the relative...

The present paper analyses a broad range of one- and multifactor models of the term structure of interest rates. We assess the influence of the number of factors, mean reversion, and the factor probability distributions on the term structure shapes the models generate, and use spread options as...

The paper deals with the valuation and hedging of non path- dependent European options on one or several underlyings in a model of an international economy which allows for both interest rate and exchange rate risk. The contingent claims may pay off in arbitrary currencies. Using martingale...

This paper deals with the valuation and the hedging of non-path-dependent European options on one or several underlying assets in a model of an international economy allowing for both, interest rate risk and exchange rate risk. Using martingale theory and, in particular, the change of numeraire...

If calibrated to an observed term structure of interest rates that only covers a finite range of times-to-maturity an HJM-model of the term structure of interest rates will eventually die out in finite time as bonds reach maturity. This poses problems for the pricing and hedging of certain...