Cylindrical stochastic integration and applications to financial term structure modeling
Probability
2023-05-16 v4 Mathematical Finance
Abstract
We develop a novel - cylindrical - solution concept for stochastic evolution equations. Our motivation is to establish a Heath-Jarrow-Morton framework capable of analysing financial term structures with discontinuities, overcoming deep stochastic-analytic limitations posed by mild or weak solution concepts. Our cylindrical approach, which we investigate in full generality, bypasses these difficulties and nicely mirrors the structure of a large financial market.
Cite
@article{arxiv.2208.03939,
title = {Cylindrical stochastic integration and applications to financial term structure modeling},
author = {Johannes Assefa and Philipp Harms},
journal= {arXiv preprint arXiv:2208.03939},
year = {2023}
}
Comments
19 pages, 2 figures