An Overview of Interest Rate Theory
In this paper we give a short overview of some basic topics in interest rate theory, from the point of view of arbitrage free pricing. We cover short rate models, affine term structure models, inversion of the yield curve, the Musiela parameterization, and the potential approach to positive interest rates. The text is essentially self contained.
KeywordsInterest Rate Term Structure Forward Rate Martingale Measure Bond Price
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