Models of the Term Structure of Interest Rates: Review, Trends, and Perspectives

Oldrich Alfons Vasicek and Francisco Venegas-Martínez
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Oldrich Alfons Vasicek: Vasicek Associates, U.S.A.

Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), 2021, vol. 16, issue 2, 1-28

Abstract: The paper provides an overview of models of the term structure of interest rates. It is a technical exposition of the theory of arbitrage-free behavior of interest rates of different maturities. The short rate models acquire current relevance for their ability to describe and explain the existence of negative interest rates, as they have been observed in Europe and Asia. Current economic conditions, in an environment of uncertainty generated by a global economic recession, affect the behavior of interest rates, which invites a more detailed review of the factors that influence in their dynamics. This article aims to review the trends and perspectives of models of the term structure and highlights some areas for future research.

Keywords: interest rates; term structure; Vasicek model (search for similar items in EconPapers)
JEL-codes: D50 E43 (search for similar items in EconPapers)
Date: 2021
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