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What is the natural scale for a L\'evy process in modelling term structure of interest rates?

This paper gives examples of explicit arbitrage-free term structure models with L\'evy jumps via state price density approach. By generalizing quadratic Gaussian models, it is found that the probability density function of a L\'evy process is a "natural" scale for the process to be the state variable of a market.
Year of publication:
2006-12
Authors: Jir\^o Akahori ; Tsuchiya, Takahiro
Institutions: arXiv.org
Extent:
application/pdf
Series:
Type of publication: Book / Working Paper
Source:
Persistent link: https://www.econbiz.de/10005098990
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