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Introduction to Stochastic Finance pp 217–246Cite as

Term Structure Models for Interest Rates

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Abstract

In the Black-Scholes model, it was assumed that the interest rate is a constant or a deterministic function. For short-dated options on stock-like assets, it is an acceptable approximation. However, for pricing interest rate derivatives or interest rate risk management, it is an unreasonable assumption. Therefore, one of the major topics in finance theory is the modeling of random interest rates and the pricing of interest rate derivatives.

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Authors and Affiliations

  1. Academy of Mathematics and System Science, Chineses Academy of Sciences, Beijing, China

    Jia-An Yan

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  1. Jia-An Yan
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Yan, JA. (2018). Term Structure Models for Interest Rates. In: Introduction to Stochastic Finance. Universitext. Springer, Singapore. https://doi.org/10.1007/978-981-13-1657-9_8

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