Speaker: Kyounghee Kim
Title: Alternative Probability in No-arbitrage Models
Affiliation: Indiana University
Date: Monday, February 13, 2006.
Place and Time: Room 101 - Love Building, 3:35-4:30 pm.
Refreshments: Room 204 - Love Building, 3:00 pm.

Abstract. The no-arbitrage condition leads us the market price of risk and risk-neutral measures where all the discounted asset prices are martingales. We discuss the market price of risk and the choice of numeraires. Using the forward measure (discounted by one of the bond price processes) we construct a model for bond prices in which the volatility of the forward rate is a linear function of the forward rate.