Latest Results for Finance and Stochastics
Fri, 14 Feb 2020 00:00:00 GMT language
We develop a general term structure framework taking stochastic discontinuities explicitly into account. Stochastic discontinuities are a key feature in interest rate markets, as for example the jumps of the term structures in correspondence to monetary policy meetings of the ECB show. We provide a general analysis of multiple curve markets under minimal assumptions in an extended HJM framework and provide a fundamental theorem of asset pricing based on NAFLVR. The approach with stochastic discontinuities permits to embed market models directly, unifying seemingly different modelling philosophies. We also develop a tractable class of models, based on affine semimartingales, going beyond the requirement of stochastic continuity.