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Short rate models are often classified as endogenous and exogenous. Endogenous short rate models are short rate models where the term structure of interest rates, or of zero-coupon bond prices (,), is an output of the model, so it is "inside the model" (endogenous) and is determined by the model parameters. Exogenous short rate models are ...
It is a one-factor model; that is, a single stochastic factor—the short rate—determines the future evolution of all interest rates. It was the first model to combine the mean-reverting behaviour of the short rate with the log-normal distribution, [1] and is still widely used. [2] [3]
Models developed according to the HJM framework are different from the so-called short-rate models in the sense that HJM-type models capture the full dynamics of the entire forward rate curve, while the short-rate models only capture the dynamics of a point on the curve (the short rate). However, models developed according to the general HJM ...
In mathematical finance, the Cox–Ingersoll–Ross (CIR) model describes the evolution of interest rates. It is a type of "one factor model" (short-rate model) as it describes interest rate movements as driven by only one source of market risk. The model can be used in the valuation of interest rate derivatives.
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Pages in category "Short-rate models" The following 14 pages are in this category, out of 14 total. This list may not reflect recent changes. * Short-rate model; A.
With a fixed-rate product, such as a personal loan or savings account, the interest rate you sign up for is the interest rate you’ll either pay or earn for the life of the product.