Brace, Alan; Dariusz G¸atarek; Musiela, Marek - In: Mathematical Finance 7 (1997) 2, pp. 127-155
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...