Economics, Econometrics and Finance
4 years ago

New study reveals major flaw in popular interest rate models!

1 view
ON NON-EXISTENCE OF A ONE FACTOR INTEREST RATE MODEL FOR VOLATILITY AVERAGED GENERALIZED FONG-VASICEK TERM STRUCTURES
Ata Stehlikov

Paper Summary

The researchers looked at a complex interest rate model with stochastic volatility and studied how bond prices are affected. They found that popular one-factor interest rate models cannot accurately capture the bond prices as described in their study.

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