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Real-world models for multiple term structures: a unifying HJM framework

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  • Claudio Fontana
  • Eckhard Platen
  • Stefan Tappe

Abstract

We develop a unifying framework for modeling multiple term structures arising in financial, insurance, and energy markets. We adopt the Heath-Jarrow-Morton approach under the real-world probability and provide a full description of the set of local martingale deflators, which ensure market viability. We perform a thorough analysis of the stochastic partial differential equation arising in the model, addressing existence and uniqueness of a solution, invariance properties and existence of affine realizations.

Suggested Citation

  • Claudio Fontana & Eckhard Platen & Stefan Tappe, 2024. "Real-world models for multiple term structures: a unifying HJM framework," Papers 2411.01983, arXiv.org.
    • Handle: RePEc:arx:papers:2411.01983
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    References listed on IDEAS

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