Mathematical Finance · 1994 · 200 citations · 10 references
BusinessFinanceMathematicsFinancial EconomicsQuantitative FinanceStochastic ProcessesInterest Rate ModelingMarkov ProcessesNumerical Methods In FinanceOption PricingOption Pricing ModelsVolatility ModelingHeath-jarrow-morton FrameworkOption Pricing AlgorithmsOption Pricing TheoryOption Pricing Under Stochastic Interest RatesOption Pricing Under Stochastic VolatilityOption Pricing ValuationStochastic Interest Rate ModelsVolatility
We answer this question in the very general context of the n‐factor Heath, Jarrow, and Morton model for the evolution of the term structure of interest rates, with nonrandom volatility. the answer is that a constraint is imposed on the behavior of the volatility structure. We explain the importance of this result for the design of efficient numerical algorithms for the valuation of options on the term structure.
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A Theory of the Term Structure of Interest Rates
John C. Cox, Jonathan E. Ingersoll, Stephen A. Ross · Econometrica · 1985 · 8.6K citations
Pricing Interest-Rate-Derivative Securities
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