Long-Term Yield in an Affine HJM Framework on S-d(+)

Biagini, Francesca; Gnoatto, Alessandro; Härtel, Maximilian (2018): Long-Term Yield in an Affine HJM Framework on S-d(+). In: Applied Mathematics and Optimization, Vol. 77, No. 3: pp. 405-441

Abstract

We develop the HJM framework for forward rates driven by affine processes on the state space of symmetric positive semidefinite matrices. In this setting we find an explicit representation for the long-term yield in terms of the model parameters. This generalises the results of El Karoui et al. (Rev Deriv Res 1(4):351-369, 1997) and Biagini and Hartel (Int J Theor Appl Financ 17(3):1-24, 2012), where the long-term yield is investigated under no-arbitrage assumptions in a HJM setting using Brownian motions and Levy processes respectively.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Mathematics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 0095-4616
• Language: English