Year
1999
Authors
RONCORONI Andrea, GUIOTTO P.
Abstract
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. et RONCORONI, A. (1999). Infinite Dimensional HJM Dynamics for the Term Structure of Interest Rates. ESSEC Business School.