A General Framework for Term Structure Models Driven by Lévy Processes∗

Abstract

We describe a framework in which to generalize the Heath, Jarrow and Morton model for the term structure of interest rates. We represent the model in terms of the triplet of characteristics of the underlying semimartingales. We state and prove the necessary and sufficient conditions for absence of arbitrage in terms of the characteristics of the price process. The methodology is then extended to find sufficient conditions for absence of arbitrage in the defaultable case.

Cite this paper

@inproceedings{Hernndez2005AGF, title={A General Framework for Term Structure Models Driven by Lévy Processes∗}, author={Jorge Hern{\'a}ndez}, year={2005} }