One-factor interest rate models : analytic solutions and approximations

Date

2005

Author

Yolcu, Yeliz

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The uncertainty attached to future movements of interest rates is an essential part of the Financial Decision Theory and requires an awareness of the stochastic movement of these rates. Several approaches have been proposed for modeling the one-factor short rate models where some lead to arbitrage-free term structures. However, no definite consensus has been reached with regard to the best approach for interest rate modeling. In this work, we briefly examine the existing one-factor interest rate models and calibrate Vasicek and Hull-White (Extended Vasicek) Models by using Turkey's term structure. Moreover, a trinomial interest rate tree is constructed to represent the evolution of Turkey̕s zero coupon rates.

Subject Keywords

Probabilities.

URI

http://etd.lib.metu.edu.tr/upload/2/12605863/index.pdf
https://hdl.handle.net/11511/14825

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Graduate School of Applied Mathematics, Thesis