# Market Price of Risk and Random Field Driven Models of Term Structure: A Space-Time Change of Measure Look

@article{Allouba2010MarketPO, title={Market Price of Risk and Random Field Driven Models of Term Structure: A Space-Time Change of Measure Look}, author={Hassan Allouba and Victor Goodman}, journal={arXiv: Pricing of Securities}, year={2010} }

No-arbitrage models of term structure have the feature that the return on zero-coupon bonds is the sum of the short rate and the product of volatility and market price of risk. Well known models restrict the behavior of the market price of risk so that it is not dependent on the type of asset being modeled. We show that the models recently proposed by Goldstein and Santa-Clara and Sornette, among others, allow the market price of risk to depend on characteristics of each asset, and we quantify… Expand

#### 2 Citations

The sensitivity analysis of propagator for path independent quantum finance model

- Mathematics, Chemistry
- 2011

Quantum finance successfully implements the imperfectly correlated fluctuation of forward interest rates at different maturities, by replacing the Wiener process with a two-dimensional quantum field.… Expand

#### References

SHOWING 1-10 OF 12 REFERENCES

The Term Structure of Interest Rates as a Random Field

- Economics, Mathematics
- 1997

Forward rate dynamics are modeled as a random field. In contrast to multifactor models, random field models offer a parsimonious description of term structure dynamics, while eliminating the… Expand

Bond pricing and the term structure of interest rates

- Economics
- 1989

This paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates. The methodology, based on the equivalent martingale measure technique, takes… Expand

The Dynamics of the Forward Interest Rate Curve with Stochastic String Shocks

- Mathematics, Physics
- 1998

This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to… Expand

The Mathematics of Finance: Modeling and Hedging

- Economics
- 2000

This book is ideally suited for an introductory undergraduate course on financial engineering. It explains the basic concepts of financial derivatives, including put and call options, as well as more… Expand

Pricing Interest-Rate-Derivative Securities

- Economics
- 1990

This article shows that the one-state-variable interest-rate models of Vasicek (1977) and Cox, Ingersoll, and Ross (1985b) can be extended so that they are consistent with both the current term… Expand

Dynamic Asset Pricing Theory

- Economics
- 1992

"Dynamic Asset Pricing Theory" is a textbook for doctoral students and researchers on the theory of asset pricing and portfolio selection in multiperiod settings under uncertainty. The asset pricing… Expand

Asset Pricing Theory

- Business
- 2009

Asset Pricing Theory is an advanced textbook for doctoral students and researchers that offers a modern introduction to the theoretical and methodological foundations of competitive asset pricing.… Expand

Financial Calculus: An Introduction To Derivative Pricing

- Mathematics
- 1998

“Notoriously, works on mathematical finance can be precise, and they can be comprehensible. Sadly, as Dr. Johnson might have put it, the ones which are precise are not necessarily comprehensible, and… Expand

Different types of spdes in the eyes of girsanov's theorem

- Mathematics
- 1998

We prove Girsanov's theorem for continuous orthogonal martingale measures. We then define space-time SDEs, and use Girsanov's theorem to establish a oneto- one correspondence between solutions of two… Expand

Pricing interest rate derivative securities , Review of Financial Studies 3 , 573 - 592 [ 9 ]

- 1990