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2005•Journal of Wuhan University of Science and TechnologyRequires access

Interest Rate Model of Jump-Diffusion Process under HJM Frames

Baochen Yang

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Abstract

Due to some unexpected stochastic events,the pure continuous diffusion process is unable to describe the interest rate behavior exactly.This article gives a term structure of interest rates model which submits to jump-diffusion process under the HJM frames.The formula of bond pricing in the fixed-income market has been deduced and presented to aid investment and risk management.

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What this paper is about

Due to some unexpected stochastic events,the pure continuous diffusion process is unable to describe the interest rate behavior exactly.This article gives a term structure of interest rates model which submits to jump-diffusion process under the HJM frames.The formula of bond pricing in the fixed-income market has been deduced and presented to aid investment and risk management.

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Available abstract

Due to some unexpected stochastic events,the pure continuous diffusion process is unable to describe the interest rate behavior exactly.This article gives a term structure of interest rates model which submits to jump-diffusion process under the HJM frames.The formula of bond pricing in the fixed-income market has been deduced and presented to aid investment and risk management.

Key concepts: Heath–Jarrow–Morton framework, Jump diffusion, Interest rate, Forward rate, Short-rate model, Diffusion, Jump, Fixed income

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