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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2024
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2401.11619 |
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Table of Contents:
- We study the problems of consistency and of the existence of finite-dimensional realizations for multi-curve interest rate models of Heath-Jarrow-Morton type, generalizing the geometric approach developed by T. Björk and co-authors in the classical single-curve setting. We characterize when a multi-curve interest rate model is consistent with a given parameterized family of forward curves and spreads and when a model can be realized by a finite-dimensional state process. We illustrate the general theory in a number of model classes and examples, providing explicit constructions of finite-dimensional realizations. Based on these theoretical results, we perform the calibration of a three-curve Hull-White model to market data and analyse the stability of the estimated parameters.