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Interest Rate Modelling. Wiley Finance. ISBN 978-0-471-97523-6. Rajna Gibson, François-Serge Lhabitant and Denis Talay (2001). Modeling the Term Structure of Interest Rates: A Review of the Literature. RiskLab, ETH. Frank J. Fabozzi and Moorad Choudhry (2007). The Handbook of European Fixed Income Securities. Wiley Finance. ISBN 978-0-471-43039-1.
The expectations hypothesis of the term structure of interest rates (whose graphical representation is known as the yield curve) is the proposition that the long-term rate is determined purely by current and future expected short-term rates, in such a way that the expected final value of wealth from investing in a sequence of short-term bonds equals the final value of wealth from investing in ...
The HJM framework originates from the work of David Heath, Robert A. Jarrow, and Andrew Morton in the late 1980s, especially Bond pricing and the term structure of interest rates: a new methodology (1987) – working paper, Cornell University, and Bond pricing and the term structure of interest rates: a new methodology (1989) – working paper ...
John Hull and Alan White, "One factor interest rate models and the valuation of interest rate derivative securities," Journal of Financial and Quantitative Analysis, Vol 28, No 2, (June 1993) pp. 235–254. John Hull and Alan White, "Pricing interest-rate derivative securities", The Review of Financial Studies, Vol 3, No. 4 (1990) pp. 573–592.
The interest rate channel posits that an increase in the short-term nominal interest rate leads first to an increase in longer-term nominal interest rates. This is described by the expectation hypothesis of the term structure. In turn, this affects the real interest rate and the cost of capital, because prices are assumed to be sticky in the ...
Monetary impacts on interest rates and the term structure of interest rates [30] Lessons of monetary/financial history [31] Transmission mechanisms of monetary policy as to the macroeconomy [32] Neutrality of money vs. money illusion as to a change in the money supply, price level, or inflation on output [33]
“No adjustable-rate CD or any that move with lower interest rates would make sense in a falling rate environment.” Long-term CDs (3–5 years) If rates are expected to fall further or remain ...
An affine term structure model is a financial model that relates zero-coupon bond prices (i.e. the discount curve) to a spot rate model. It is particularly useful for deriving the yield curve – the process of determining spot rate model inputs from observable bond market data.