The paper investigates the possibility of an arbitrage-free model for the term structure of interest rates where the yield curve only changes through a parallel shift. HJM type forward rate models driven by a multidimensional Wiener process and by a general marked point process are considered....

We investigate the possibility of an arbitrage free model for the term structure of interest rates where the yield curve only changes through a parallel shift. We consider HJM type forward rate models driven by a multidimensionalWiener process as well as by a general marked point process. Within...

It is well known that a quantile is the solution to a minimization problem. We show that the conditional quantile with respect to a general -algebra is the solution to similar a minimization problem.

Using Gateuax dierentials we study how the value of a stream of cash flows is changed as the forward rate curve changes. Using this approach we are able to derive an alternative to the standard method of duration matching, and we argue why it better than ordinary duration matching. We also solve...

We establis necessary and sufficient conditions for a linear taxation system to be neutral - within the multi-period discrete time "no arbitrage" model - in the sense that valuation is invariant to the exact sequence of tax rates, realization dates as well as immune to timing options attempting...

It is a delicate matter to trade spot products and financial derivatives in energy markets. Op-posite to bond and stock markets, the underlying assets are real products and a significant part of the demand for them represents a real need for the products, which can only be substituted away with...

We describe the background and the basic funding mechanisms for the type of adjustable rate mortgage loans that were introduced in the Danish market in 1996. Each loan is funded separately by tap issuing pass-through mortgage bonds (“strict balance principle). The novelty is a funding...

The return on a bond investment comes from three sources: Interest payments, real- <p> ized capital gains and accrued capital gains. We provide an exact description on how <p> the capital gains can be measured under a variety of accounting rules for measuring <p> accruals and study the theoretical...</p></p></p>

The purpose of this paper is to shed light on some qualitative properties of binomial lattice models by analysing the entire distribution of future values arising from simple bond investment strategies. Our analysis is carried out by first determining the arbitrage free developments of the...