CCF Seminar

Robert Aguirre
Carnegie Mellon University
Title: An Arbitrage-Free Proportional Volatility Term Structure Model

Abstract: We construct a continuous-time term structure model in the risk-neutral measure via a family of instantaneous forward rates $f(t, T)$ such that: (1) $df/f$ has deterministic volatility, (2) $f(t,T)$ explodes with positive probability for positive $t$ and $T$, and (3) the family of $B(t,T)$ constructed in the expected way create an arbitrage-free collection of assets with an appropriate choice of numeraire.

Date: Monday, November 12, 2012
Time: 5:00 pm
Location: Wean Hall 6423
Submitted by:  Steve Shreve