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The Market Price of Risk on the Levy Interest Rate Model
- Issue Date
- May-2004
- Publisher
- 한양대학교 경제연구소
- Keywords
- Levy process; Term structure of interest rate; HJMModel
- Citation
- Journal of Economic Research (JER), v.9, no.1, pp.1 - 28
- Journal Title
- Journal of Economic Research (JER)
- Volume
- 9
- Number
- 1
- Start Page
- 1
- End Page
- 28
- ISSN
- 1226-4261
- Abstract
- We derive a general form of the market prices of risk from Levyterm structure model. When the models of asset prices or in-terests rates follow semimartingale processes, the market prices ofrisk are produced from two parts. This means the measure changeis not unique. We provide the market prices of risk in incompletemarket. The market prices of risk obtained from several standardmethods give the explanations of the stylized facts on the termpremuin. We also extend the studies of the default free case todefaultable one. As an application, we price the pure discountbond and FRN(Floating Rate Note) under proper measures.
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Related Researcher
- Rhee, Joon Hee
- College of Business Administration (School of Business Administration)