Timeline for Does Vasicek interest rate model had any derivation that follows from a list of assumptions?
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| May 19, 2019 at 14:11 | comment | added | Aksakal almost surely binary | @AlanLui, good luck with that. | |
| May 19, 2019 at 6:12 | comment | added | Victor | @Aksakal But in statistics, I heard a subject called testing statistical hypothesis and now it come to mind(for example, the notion of uniformly most powerful test can test out if a stat test is better than another test in precision of all the critical region of some data) although not 100 % sure what the whole subject does, but I was guessing Finance had its own version of the subject that either includes as a section or a chapter in the textbook, and so I think there is some justification of the model I asked. | |
| May 19, 2019 at 5:40 | comment | added | Aksakal almost surely binary | @AlanLui, you'll never get an answer to a question like that in finance. This is not a fundamental science like physics. If anything, there can be a ton of reasons why this model should not be the right model. It's simple and economists like to use it in studies where the exact evolution of rates is not so important. It captures mean reverting characteristic. | |
| May 19, 2019 at 5:35 | comment | added | Victor | @Aksakal The paper seems to be esoteric and long but my question is why do analyst assuming that this model fit to estimate interest rate but not other models that may share some similar properties, for example the models with the mean reverting propertie? | |
| May 19, 2019 at 4:10 | comment | added | Aksakal almost surely binary | The model itself is known as Ornstein Uhlenbeck process in physics. Did you read Vasicek paper? | |
| May 18, 2019 at 23:42 | history | edited | Victor | CC BY-SA 4.0 |
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| May 18, 2019 at 22:23 | comment | added | Victor | @noob2 - Although Vasicek models did not had a detail oriented/rigorous explanation on how it work, do other more complicated interest rate/finance models had math derivation just as some math/stat model(gamma distribution, exponential distribution, normal distribution) had both intuitve explanation and rigorous derivation? Thank You Very Much for your kind attention and detailed oriented comment on top. | |
| May 18, 2019 at 22:08 | comment | added | nbbo2 | Vasicek model was developed a long time ago (1977). It was the first interest rate model. Only assumption was that interest rates are mean reverting, and this is the mathematically simplest model having that property. It is not considered very advanced by present day standards, just a first step. | |
| May 18, 2019 at 21:18 | history | edited | Victor | CC BY-SA 4.0 |
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| May 18, 2019 at 21:05 | history | edited | Victor | CC BY-SA 4.0 |
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| May 18, 2019 at 21:00 | history | edited | Victor |
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| May 18, 2019 at 20:55 | history | edited | Victor | CC BY-SA 4.0 |
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| May 18, 2019 at 20:50 | review | First posts | |||
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| May 18, 2019 at 20:50 | history | asked | Victor | CC BY-SA 4.0 |