Financial Mathematics Seminar

Thursday, September 30
3:35 pm
106 Love

Invariant measures for HJM models

Michael Tehranchi, University of Texas at Austin

This talk analyzes the mean-reverting behavior of time-homogeneous
Heath-Jarrow-Morton (HJM) forward rate models in the weighted Sobolev
space H_w. An explicit sufficient condition is given under which
invariant measures exist for the HJM dynamics. In particular, every HJM
model with constant volatility and market price of risk has a family of
invariant measures parametrized by the distribution of the long rate.