In this paper, a class of forward rate dependent Markovian transformations of the Heath-Jarrow-Morton [16] term structure model are obtained by considering volatility processes that are solutions of linear ordinary differential equations. These transformations generalise the Markovian systems...

This paper considers a class of Heath-Jarrow-Morton (1992) term structure models, characterized by time deterministic volatilities for the instantaneous forward rate. The bias that arises from using observed futures yields as a proxy for the unobserved instantaneous forward rate is analyzed. The...

We provide analytic pricing formulas for Fixed and Floating Range Accrual Notes within the multifactor Wishart affine framework which extends significantly the standard affine model. Using estimates for three short rate models, two of which are based on the Wishart process whilst the third one...

Volatility swaps and volatility options are financial products written on discretely sampled realized variance. Actively traded in over-the-counter markets, these products are often priced by continuously sampled approximations to simplify the computations. This paper presents an analytical...

In this paper a simulation approach for defaultable yield curves is developed within the Heath et al. (1992) framework. The default event is modelled using the Cox process where the stochastic intensity represents the credit spread. The forward credit spread volatility function is affected by...

Research on the Heath-Jarrow-Morton (1992) term structure models so far has focused on the class having time-deterministic instantaneous forward rate volatility. In this case the forward rate is Markovian, even if the spot rate process is not. However, this Markovian feature can only be used...

Margrabe provides a pricing formula for an exchange option where the distributions of both stock prices are log-normal with correlated Wiener components. Merton has provided a formula for the price of a European call option on a single stock where the stock price process contains a continuous...

The defaultable forward rate is modeled as a jump diffusion process within the Schonbucher (2000, 2003) general Heath, jarrow and Morton (1992) framework where jumps in the defaultable term structure f^d(t, T) cause jumps and defaults to the defaultable bond prices P^d(t, T). Within this...

This paper examines the pricing of interest rate derivatives when the interest rate dynamics experience infrequent jump shocks modelled as a Poisson process and within the Markovian HJM framework developed in Chiarella & Nikitopoulos (2003). Closed form solutions for the price of a bond option...