The Dynamics of the Forward Interest Rate Curve with Stochastic String Shocks
提出一类新的利率期限结构模型，允许每个瞬时远期利率由不同的随机冲击驱动，并保持曲线连续。该模型能简洁地生成任意到期日远期利率间的相关模式，无需在计量模型中添加误差项，且可通过模拟为利率期权定价。
This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to keep the forward rate curve continuous. We term the process followed by the shocks to the forward curve ``stochastic strings'', and construct them as the solution to stochastic partial differential equations, that allow us to offer a variety of interesting parametrizations. The models can produce, with parsimony, any sort of correlation pattern among forward rates of different maturities. This feature makes the models consistent with any panel dataset of bond prices, not requiring the addition of error terms in econometric models. Interest rate options can easily be priced by simulation. However, options can only be perfectly hedged by trading in bonds of all maturities available.