Extension of Short Rate Model Under a Lévy Process
A lot of abnormalities occur in real-life scenarios, thus leading to some difficulties in modelling such scenarios without a deeper understanding of certain aspects of Lévy processes. In this paper, the short rate model of Hull-White (1990) is extended to a model for capturing possibilities of jump...
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| Format: | Article |
| Language: | English |
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Fountain University Osogbo
2023-09-01
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| Series: | Fountain Journal of Natural and Applied Sciences (FUJNAS) |
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| Online Access: | https://www.fountainjournals.com/index.php/FUJNAS/article/view/464 |
| Summary: | A lot of abnormalities occur in real-life scenarios, thus leading to some difficulties in modelling such scenarios without a deeper understanding of certain aspects of Lévy processes. In this paper, the short rate model of Hull-White (1990) is extended to a model for capturing possibilities of jumps in real-life situations using a class of Lévy processes called a variance gamma process.
Mathematics Subject Classification (2020). 91G30, 62P05
Keywords: Lévy processes, Brownian motion, Hull-White model, Variance gamma process
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| ISSN: | 2350-1863 2354-337X |