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This document discusses Lèvy models for interest rates and foreign exchange. It begins by introducing Lèvy processes as a general class of models that can be used to model asset prices, beyond just Brownian motion models. It then establishes a general framework for constructing geometric Lèvy models for pricing assets, where the excess rate of return on investment-grade assets is related to the risk aversion and volatility in a nonlinear way. The excess rate of return is shown to always be positive and incr

Author

rdouglas2002

Language

EN