SFB 303 Discussion Paper No. B - 377

Author: Musiela, Marek, and Marek Rutkowski
Title: Continuous-Time Term Structure Models
Abstract: The problem of term structure of interest rates modelling is considered in a continuous-time framework. The emphasis is on the bond prices, forward bond prices or LIBOR rates, rather than on the instantaneous rates as in the traditional models. Forward and spot probability measures are introduced in this general setup. Two conditions of no-arbitrage are examined. A unique process of savings account implied by an arbitrage-free family of bond prices is identified.
Keywords: term structure of interest rates, forward measure, martingale
JEL-Classification-Number: G13
Creation-Date: June 1996
URL: ../1996/b/bonnsfb377.pdf

SFB 303 Homepage

21.04.1998, Webmaster