Heath-Jarrow-Morton Model - HJM Model

AAA

DEFINITION of 'Heath-Jarrow-Morton Model - HJM Model'

A model that applies forward rates to an existing term structure of interest rates to determine appropriate prices for securities that are sensitive to changes in interest rates.

INVESTOPEDIA EXPLAINS 'Heath-Jarrow-Morton Model - HJM Model'

The HJM model is very theoretical and is used at the most advanced levels of financial analysis. It is used mainly by arbitrageurs seeking arbitrage opportunities.
RELATED TERMS
  1. Financial Modeling

    The process by which a firm constructs a financial representation ...
  2. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  3. Binomial Option Pricing Model

    An options valuation method developed by Cox, et al, in 1979. ...
  4. Black Scholes Model

    A model of price variation over time of financial instruments ...
  5. Jarrow Turnbull Model

    One of the first reduced-form models for pricing credit risk. ...
  6. Term Structure Of Interest Rates

    The relationship between interest rates or bond yields and different ...
Related Articles
  1. Trading The Odds With Arbitrage
    Options & Futures

    Trading The Odds With Arbitrage

  2. What Investors Should Know About Interest ...
    Investing Basics

    What Investors Should Know About Interest ...

  3. Dividends, Interest Rates And Their ...
    Options & Futures

    Dividends, Interest Rates And Their ...

  4. Interest Rates And Your Bond Investments
    Investing Basics

    Interest Rates And Your Bond Investments

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center