This paper considers inflation modelling by using the time changed Levy processes of Carr and Wu (2004), in a Heath-Jarrow-Morton framework (see also Jarrow and Yildirim (2003)). By applying the results in Andersen (2008), we derive drift conditions for nominal and real forward rates and zero...

In this paper we formulate a Heath-Jarrow-Morton framework based on time changed Levy processes. Our framework is based on the time changed Levy processes described in Carr and Wu (2004). Therefore, the framework allows us to capture stylized facts for interest rates, namely 1) non-normal...

The topic of this thesis is the modeling of risks in interest-rate and inflation markets. Interest-rate risk is an important issue to investors. For instance, according to BIS (2010) the notional value of over-the-counter interest-rate derivatives markets is 465,260 billion US-dollar. This...