This paper deals with the integration of the yield curve estimation technology into an arbitrage free stochastic dynamic. This problem is solved by an infinite-dimensional model which incorporates and redefines previous results by Heath, Jarrow, Morton and Musiela. A closed-form caplet formula is provided in terms of the decomposed term structure. A calibration procedure is also described.
GUIOTTO, P. and RONCORONI, A. (1999). Infinite Dimensional HJM Dynamics for the Term Structure of Interest Rates. ESSEC Business School.