Bond market models with Levy random factors

Mathematical Finance/Financial Engineering Seminar
Wednesday, April 25, 2012 - 3:05pm for 1 hour (actually 50 minutes)
Skiles 006
Jerzy Zabczyk – Institute of Mathematics, Polish Academy of Sciences
Christian Houdré

Please Note: Hosts Christian Houdre and Liang Peng

The talk is devoted to the Heath-Jarrow-Morton modeling of the bond market with stochastic factors of the Levy type. It concentrates on properties of the forward rate process like positivity and mean reversion. The process satisfies a stochastic partial differential equation and sufficient conditions are given under which the equation has a positive global solution. In the special case, when the volatility is a linear functional of the forward curve, the sufficient conditions are close to the necessary ones.