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  1. What general approaches could you recommend for modeling spot rates(for different maturities) and forward rates?(eg for LIBOR)
  2. I need to generate scenarios for term-structure of interest rates.
  3. What is an optimal way to generate scenarios for interest rates when the number of scenarios is restricted(# of paths is bounded)? I want to build optimal ensemble of trajectories.
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  • $\begingroup$ This question is too broad / not specific. Can you please elaborate on the context, i.e. what are you trying to do, is this for a Monte Carlo simulation, what is the asset type, what are your risk factors? $\endgroup$ – jaamor Aug 24 '15 at 20:48
  • $\begingroup$ Hi, jamoor. Thanks for your answer. I've corrected the question. $\endgroup$ – Vlad Pimkin Aug 26 '15 at 20:04
  • $\begingroup$ The question is still too broad, there are books on this :-) As for 3 if you're referring to numerical efficiency then try in general variance reduction methods; among those applicable in most contexts are stratified sampling or (its advanced high-dimensional version) Quasi Monte Carlo, they can be very tricky though. $\endgroup$ – Quartz Aug 28 '15 at 11:38
  • $\begingroup$ @Quartz is right, I would like to propose this question in two parts: (1, 2) and 3. This will still be broad but I hope answerable. $\endgroup$ – Bob Jansen♦ Aug 28 '15 at 11:40
  • $\begingroup$ Not reopening for now but as said, edits are welcome. $\endgroup$ – Bob Jansen♦ Sep 2 '15 at 8:36