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...