Abstract
We propose a term structure of forward rates driven by a kernel-correlated Levy random field under the HJM framework. The kernel-correlated Levy random field is composed of a kernel-correlated Gaussian random field and a centered Poisson random measure. We shall give a criterion to preclude arbitrage under the riskneutral pricing measure. As applications, an interest rate derivative with general payoff functional is priced under this pricing measure.
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