Revolutionizing Interest Rates: Dynamic Model Predicts Future Market Scenarios Uncertainty
The term structure of interest rates shows how much it costs to borrow or invest money for different time periods. Dynamic term structure models use math to predict future market scenarios with uncertainty. These models help determine the value and risk of different financial instruments in bond and interest rate markets. They consider factors like short-term interest rates and market price of risk to prevent unfair trading. By using these models, experts can analyze bond and interest rate derivatives accurately.