Short-rate joint-measure models

A joint-measure model combining Q-measure and P-measure


Traditionally, derivatives researchers have tended to focus on the (risk-neutral) Q-measure because of its role in pricing. Since the crisis, risk management has assumed an increasing importance and there is now a realisation among many researchers that the (real-world) P-measure should be given more attention. In this paper we propose a way to construct a single forward-looking model for interest rates, which represents their evolution under both the Q-measure and P-measure (a joint-measure mod

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