New bond pricing models could revolutionize financial forecasting and risk management.
The article explores different models for predicting bond prices based on short-term interest rates. By using specific equations and mathematical techniques, the researchers found that only a few models can accurately predict bond prices. These models include the CIR(1980) model and the Ahn-Gao model. The key to finding accurate solutions lies in meeting specific conditions related to the structure of interest rate models and the coefficients used in the equations.