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Completeness Of Bond Market Driven By Lévy Process

Author

Listed:
  • MICHAŁ BARSKI

    (Mathematics Department, Cardinal Stefan Wyszyński University in Warsaw, Warsaw, Poland)

  • JERZY ZABCZYK

    (Institute of Mathematics, Polish Academy of Sciences, Warsaw, Poland)

Abstract

The completeness problem of the bond market model with the random factors determined by a Wiener process and Poisson random measure is studied. Hedging portfolios use bonds with maturities in a countable, dense subset of a finite time interval. It is shown that under natural assumptions the market is not complete unless the support of the Lévy measure consists of a finite number of points. Explicit constructions of contingent claims which cannot be replicated are provided.

Suggested Citation

  • Michał Barski & Jerzy Zabczyk, 2010. "Completeness Of Bond Market Driven By Lévy Process," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 13(05), pages 635-656.
    • Handle: RePEc:wsi:ijtafx:v:13:y:2010:i:05:n:s0219024910005942
    DOI: 10.1142/S0219024910005942
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