# Concept Question Regarding Short Rate Model

I have a conceptual question that needs help. Does anyone know whether the short rate model generate discount rate or forward rate?

• From a short rate model, you can bond price and then you can compute the forward rate. – Gordon Mar 14 '16 at 14:42

1. a model for the short rate $r_t$
2. you can calculate zero-coupon bond prices from it by $P_T = E[\exp(-\int_{0}^T r_u du)]$
3. from these prices you can calculate the yield-to-maturity $Y_T$ which fulfills $$P_T =\exp( - Y_T T)$$ thus $Y_T = - \log(P_T)/T$.