Affine Processes and Applications in Finance
by Darrell Duffie of Stanford University,
September 24, 2002
Abstract: We provide the definition and a complete characterization of regular affine processes. This type of process unifies the concepts of continuous state branching processes with immigration and Ornstein-Uhlenbeck type processes. We show, and provide foundations for, a wide range of financial applications for regular affine processes.
Keywords: Affine Process, Characteristic Function, Continuous-State Branching with Immigration, Default Risk, Infinitely Decomposable, Interest Rates, Option Pricing, Ornstein-Uhlenbeck Type.