A regularization approach to model selection, within a generalized HJM framework, is introduced, which learns the closest arbitrage-free model to a prespecified factor model. This optimization problem is represented as the limit of a one-parameter family of computationally tractable penalized...

We provide explicit solutions of certain forward-backward stochastic differential equations (FBSDEs) with quadratic growth. These particular FBSDEs are associated with quadratic term structure models of interest rates and characterize the zero-coupon bond price. The results of this paper are...