LIFTING QUADRATIC TERM STRUCTURE MODELS TO INFINITE DIMENSION

Authors


  • This research was supported by Open Research Center Project for Private Universities: matching fund subsidy from MEXT, 2004-2008. The work by the latter author was also supported by ACCESS Co.Ltd. The authors thank the anonymous referee for suggestions which improved the content of this paper.

  • Dedicated to Professor Shinichi Kotani on the occasion of his sixtieth birthday.

  • Manuscript received November 2004; final revision received August 2005.

Address correspondence to Jirô Akahori, Department of Mathematical Sciences, Ritsumeikan University, 1-1-1 Nojihigashi, Kusatsu, Shiga, 525-8577, Japan; e-mail: akahori@se.ritsumei.ac.jp.

Abstract

We introduce an infinite dimensional generalization of quadratic term structure models of interest rates, aiming that the lift will give us a deeper understanding of the classical models. We show that it preserves some of the favorable properties of the classical quadratic models.

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