Interest Rate Models

Uwe Hassler

Chapter 13 in Stochastic Processes and Calculus, 2016, pp 285-302 from Springer

Abstract: Abstract The results from the previous chapter will be applied to stochastic differential equations that were suggested in the literature for modeling interest rate dynamics. However, we do not model yield curves with various maturities, but consider the model for one interest rate only driven by one Wiener process (one-factor model). The next section starts with the general Ornstein-Uhlenbeck process which has the drawback of allowing for negative values. Subsequently, we discuss linear models for which negativity is ruled out. Finally, a class of nonlinear models will be considered.

Keywords: Interest Rate; Nonlinear Model; Stochastic Differential Equation; Financial Economic; Wiener Process (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-319-23428-1_13

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DOI: 10.1007/978-3-319-23428-1_13

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