Abstract
We propose an innovative multi-curve model involving interest rates and (ordered) spreads which are modeled by arithmetic martingale processes being larger than some arbitrarily chosen constant. Under our mean-reverting pure-jump approach, we derive tractable martingale representations for the OIS rate, the spread as well as the LIBOR rate and provide analytical caplet price formulae. In a second part, we introduce an extended jump-diffusion version of our model and investigate hedging and the computation of Greeks under this new specification. As a by-product, we infer the related arithmetic pure-jump single-curve model. We finally consider the modeling of future information in multi-curve interest rate markets by enlarged filtrations and deduce the related OIS and LIBOR rate representations as well as the corresponding information premium.
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