What is the natural scale for a Lévy process in modelling term structure of interest rates?

Details What is the natural scale for a Lévy process in modelling term structure of interest rates? What is the natural scale for a Lévy process in modelling term structure of interest rates?

2006-12-13

arxiv.org/abs/math/0612341v1

Mathematics

Probability

Scientific paper

This paper gives examples of explicit arbitrage-free term structure models
with L\'evy jumps via state price density approach. By generalizing quadratic
Gaussian models, it is found that the probability density function of a L\'evy
process is a "natural" scale for the process to be the state variable of a
market.

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