Finance Discipline Group
UTS Business School
University of Technology, Sydney

Working Paper Series

Title:
Transformation of Heath-Jarrow-Morton Models to Markovian Systems
Author(s): Ram Bhar and Carl Chiarella
Date of publication: December 1995
Working paper number: 53
Abstract:
A class of volatility functions for the forward rate process is considered, which allows the bond price dynamics in the Heath-Jarrow-Morton (HJM) framework to be reduced to a finite dimensional Markovian system. The use of this Markovian system in estimation of parameters of the volatility function via use of the Kalman filter is discussed. Further, the Markovian system allows the link to be drawn between the HJM and the Vasicek/Cox-Ingersoll-Ross (CIR) frameworks for modelling the term structure of interest rates.
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Comments:
Published as: Bhar, R. and Chiarella, C., 1997, "Transformation of Heath-Jarrow-Morton models to Markovian systems", The European Journal of Finance, 3(1), 1-26.
Known citations:

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