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Markovian short rates in multidimensional term structure Levy models

Gapeev, Pavel V. and Kuechler, Uwe (2020) Markovian short rates in multidimensional term structure Levy models. Banach Center Publications. ISSN 0137-6934 (In Press)

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Abstract

We study a bond market model and the related term structure of interest rates in which the prices of zero coupon bonds are driven by a multidimensional L ́evy process. We show that the short rate forms a Markov process if and only if the deterministic forward rate volatility coefficients are decomposed into products of two factors where the factor depending on the maturity time is the same for all components. The proof is based on the analysis of sample path properties of the underlying multidimensional process.

Item Type: Article
Divisions: Mathematics
Date Deposited: 06 Apr 2020 16:33
Last Modified: 30 May 2020 23:12
URI: http://eprints.lse.ac.uk/id/eprint/104000

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