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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 88:
Bond markets where prices are driven by a general marked point process

T. Björk (), Y. Kabanov and W. Runggaldier

Abstract: We investigate the term structure for the case when interest rates are allowed to be driven by a general marked point process as well as by a Wiener process. Developing a theory which allows for measure-valued trading portfolios we study existence and uniqueness of a martingale measure, as well as completeness of the bond market. We also give sufficient conditions for the existence of an affine term structure. Developing the appropriate forward measures we give formulas for interest rate derivatives.

Keywords: Term structure of interest rates; arbitrage; bond markets; interest rates; martingales; jump processes; completeness; affine term structure; (follow links to similar papers)

JEL-Codes: G12; G13; (follow links to similar papers)

64 pages, December 1995

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This paper is published as:
Björk, T., Y. Kabanov and W. Runggaldier, (1997), 'Bond market structure in the presence of marked point processes', Mathematical Finance, Vol. 7, pages 211-239



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