The Duffie–Kan One-Factor Model

Gennady A. Medvedev ()
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Gennady A. Medvedev: Belarusian State University

Chapter Chapter 5 in Yield Curves and Forward Curves for Diffusion Models of Short Rates, 2019, pp 71-91 from Springer

Abstract: Abstract The term structure of interest rates plays a key role in determining the price of bonds. Therefore, its properties are of interest to many financial analysts. However, in the available literature one can usually only find a schematic description of these properties. Here, an attempt is made to describe in detail all possible forms of the time structure for the class of affine interest rate models, since for these models it is possible to write down the solutions explicitly. The Duffie–Kan (DK) model with an arbitrary lower bound for the risk-free (spot) interest rate is adopted as the main model. The results for the widely known CIR and Vasiček modelsVasiček model are obtained as special cases. The possible types of the shape of the yield curveYield curve are found.

Keywords: Yield interest rates; Affine model; Yield curve; Forward curve; Vasiček model; Cox–Ingersoll–Ross model; Duffie–Kan model (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-15500-1_5

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DOI: 10.1007/978-3-030-15500-1_5

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