BFS 2002 

Contributed Talk 
Josef Teichmann, Damir Filipovic
In this paper we provide the characterization of all finitedimensional HeathJarrowMorton models that admit arbitrary initial yield curves. It is well known that affine term structure models with timedependent coefficients (such as the HullWhite extension of the Vasicek short rate model) perfectly fit any initial term structure. We find that such affine models are in fact the only finitefactor term structure models with this property. We also show that there is usually an invariant singular set of initial yield curves where the affine term structure model becomes timehomogeneous. We also argue that other than functional dependent volatility structures  such as local state dependent volatility structures  cannot lead to finitedimensional realizations. Finally, our geometric point of view is illustrated by several further going examples.
www.fam.tuwien.ac.at/~jteichma/articlestalks.html