Cylindrical stochastic integration and applications to financial term structure modeling
Abstract
We develop a novel - cylindrical - solution concept for stochastic evolution equations. Our motivation is to establish a Heath-Jarrow-Morton framework capable of analysing financial term structures with discontinuities, overcoming deep stochastic-analytic limitations posed by mild or weak solution concepts. Our cylindrical approach, which we investigate in full generality, bypasses these difficulties and nicely mirrors the structure of a large financial market.
- Publication:
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arXiv e-prints
- Pub Date:
- August 2022
- DOI:
- 10.48550/arXiv.2208.03939
- arXiv:
- arXiv:2208.03939
- Bibcode:
- 2022arXiv220803939A
- Keywords:
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- Mathematics - Probability;
- Quantitative Finance - Mathematical Finance;
- 60H05 (Primary);
- 60H15;
- 91G30 (Secondary)
- E-Print:
- 19 pages, 2 figures