A term structure model with lognormal type volatility structure is proposed. The Heath, Jarrow and Morton (HJM) framework, coupled with the theory of stochastic evolution equations in infinite dimensions, is used to show that the resulting rates are well defined (they do not explode) and remain...

We derive a unified model which gives closed form solutions for caps and floors written on interest rates as well as puts and calls written on zero-coupon bonds. The crucial assumption is that forward rates with a compounding period that matches the contract, which we want to price, is...

Starting with observable annually compounded forward rates we derive a term structure model of interest rates. The model relies upon the assumption that a specific set of annually compounded forward rates is log-normally distributed. We derive solutions for interest rate caps and floors as well...

The lognormal distribution assumption for the term structure of interest is the most natural way to exclude negative spot and forward rates ... The purpose of this paper is to show that the problem with lognormal models result from modelling the wrong rate, namely the continuously compounded...

Alternative ways of introducing uncertainty to the term structure of interest rates are considered. They correspond to the different expectation hypotheses...