Martino Grasselli and Claudio Tebaldi

Finance Group (2008) : Solvable Affine Term Structure Models

Solvable Affine Term Structure Models

Martino Grasselli and Claudio Tebaldi


Mathematical Finance

An Affine Term Structure Model (ATSM) is said to be solvable if the pricing problem has an explicit solution, i.e., the corresponding Riccati ordinary differential equations have a regular globally integrable flow. We identify the parametric restrictions which are necessary and sufficient for an ATSM with continuous paths, to be solvable in a state spaceD+ × Rn-m, whereD+, the domain of positive factors, has the geometry of a symmetric cone. This class of state spaces includes as special cases those introduced by Duffie andKan (1996), andWishart termstructure processes discussed by Gourieroux and Sufana (2003). For all solvable models we provide the procedure to find the explicit solution of the Riccati ODE.

To cite this publication :

Giorgia Callegaro, Lucio Fiorin, Martino Grasselli: Quantized calibration in local volatility models. Dans: Risk Magazine, 9 , p. 62-67, 2015, ISSN: 0952-8776.


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