DEVIN, SIOBHÁN; HANZON, BERNARD; RIBARITS, THOMAS - In: International Journal of Theoretical and Applied … 13 (2010) 08, pp. 1241-1263
We consider a two-factor Heath–Jarrow–Morton (HJM) model under the risk neutral measure and show that it may be decoupled into a particular dynamic Nelson–Siegel (NS) model plus a somewhat counter-intuitive adjustment (lying outside the NS family) which keeps it arbitrage-free. We assess...