The term structure of interest rates as a random field: a stochastic integration approach

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

We investigate the term structure of zero coupon bonds, in the case where the forward rate evolves as a Wiener sheet. We introduce a definition of stochastic integral with respect to a continuous semimartingale with values in the set of continuous functions and characterize the dynamics of the zero coupon bonds. We also define a notion of generalized strategy, in order to admit the (theoretical) possibility of investing in a continuum of bonds. Finally we study the problem of utility maximization from terminal wealth in this setting and deduce a “mutual fund” theorem
Original languageEnglish
Title of host publicationRitsumeikan International Symposium on Stoch. Proc. and Appl. to Math. Fin
Pages27-52
Number of pages26
DOIs
Publication statusPublished - 2004
EventInternational Symposium Stochastic Processes and Application to Mathematical Finance - Ritsumeikan University (Japan)
Duration: 5 Mar 20039 Mar 2003

Conference

ConferenceInternational Symposium Stochastic Processes and Application to Mathematical Finance
CityRitsumeikan University (Japan)
Period5/3/039/3/03

Keywords

  • Infinite-dimensional stochastic integration, Wiener sheet, bond market, term structure of interest rates, generalized strategy, utility maximization.

Fingerprint

Dive into the research topics of 'The term structure of interest rates as a random field: a stochastic integration approach'. Together they form a unique fingerprint.

Cite this