We study the dynamics of the spread between U.S. corporate and Treasury bonds. We focus on Aaa and Baa corporate yield indices and estimate nonparametrically the dynamics of the spreads assuming that they follow a univariate diffusion process.

We analyze the joint convergence of sequences of discounted stock prices and the Radon-Nicodym derivatives of the minimal martingale measure when interest rates are stochastic. Therefrom we deduce the convergence of option values in either complete or incomplete markets. We particularize the...