New interest rate model revolutionizes financial forecasting with real-time accuracy.
The article discusses how to choose an interest rate model, focusing on practical needs. One type of model, the Heath-Jarrow-Morton (HJM) model, uses current and future interest rates to predict how rates will change over time. This model shows how the entire interest rate curve changes together, based on different levels of risk. The goal is to create a model that accurately predicts interest rates for different time periods.