Abstract:This paper proves existence of the long bond, long forward measure and long-term factorization of the stochastic discount factor (SDF) of Alvarez and Jermann (2005) and Hansen and Scheinkman (2009) in Heath-Jarrow-Morton (HJM) models in the function space framework of Filipović (2001). A sufficient condition on the weight in the Hilbert space of forward rate volatility curves is given that ensures existence of the long bond volatility process, the long bond process and the long-term factorization of the SDF in… Show more
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