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ON INCOMPLETENESS OF BOND MARKETS WITH INFINITE NUMBER OF RANDOM FACTORS
Author(s) -
Barski Michał,
Jakubowski Jacek,
Zabczyk Jerzy
Publication year - 2011
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/j.1467-9965.2010.00438.x
Subject(s) - randomness , completeness (order theory) , bond , bond market , bounded function , mathematics , mathematical economics , interval (graph theory) , bond valuation , economics , econometrics , financial economics , combinatorics , statistics , financial system , finance , mathematical analysis
The completeness of a bond market model with infinite number of sources of randomness on a finite time interval in the Heath–Jarrow–Morton framework is studied. It is proved that the market is not complete. A construction of a bounded contingent claim, which cannot be replicated, is provided.