S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 143:
Towards a General Theory of Bond Markets.

Tomas Björk (), Giovanni di Masi, Yuri Kabanov and Wolfgang Runggaldier

Abstract: The main purpose of the paper is to provide a mathematical background for the theory of bond markets similar to that available for stock markets. We suggest two constructions of stochastic integrals with respect to processes taking values in a space of continuous functions. Such integrals are used to define the evolution of the value of a portfolio of bonds corresponding to a trading strategy which is a measure- valued predictable process. The existence of an equivalent martingale measure is discussed and HJM-type conditions are derived for a jump-diffusion model. The question of market completeness is considered as a problem of the range of a certain integral operator. We introduce a concept of approximate market completeness and show that a market is approximately complete if an equivalent martingale measure is unique.

Keywords: Bond market; term structure of interest rates; stochastic integral; Banach space-valued integrators; measure-valued portfolio; jump-diffusion model; martingale measure; arbitrage; market completeness; (follow links to similar papers)

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

33 pages, December 1996

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

hastef0143.pdf    PDF-file (385kB) 
Download Statistics
This paper is published as:
Björk, Tomas, Giovanni di Masi, Yuri Kabanov and Wolfgang Runggaldier, (1997), 'Towards a General Theory of Bond Markets.', Finance and Stochastics, Vol. 1, pages 141-174



Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:hastef:0143 This page was generated on 2014-12-14 19:22:52