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Vasicek Model for Bond Pricing by JUAN DAVID MINA CASARAN is a document available to read on EtoBox.
What is Vasicek Model for Bond Pricing about?
The Vasicek model describes the short-term interest rate as a stochastic process and derives a partial differential equation for bond pricing based on this framework. It assumes that the current short rate is known, but future rates are uncertain, and that the market is efficient with no riskless arbitrage opportunities. The model leads to a term structure equation that can be solved to evaluate the bond prices and their dynamics under risk-neutral valuation.
- Author
- JUAN DAVID MINA CASARAN
- Language
- EN