# Questions tagged [short-rate]

A short-rate model is a mathematical model that describes the evolution of interest rates

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### Why are/were Euribor rates consistently lower than ECB deposit facility rates since 2020?

Why are unsecured term deposits in EUR yielding lower than a simple overnight deposit at the ECB ? Isn't it supposed to be the opposite ? The 3 month Euribor just broke -0,50% a few days ago, why was ...
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### Inferring a term structure when using a short-rate model

I'm relatively new to working with interest rate models and I am having some conceptual difficultly considering how a short-rate model can be utilized when calculating OAS of a mortgage-based bond, ...
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### Short rate models practical textbook

Currently working on a validation and testing of a yield curve model (one factor short rate model). Have been reading Andersen and Piterbarg, and Mercurio and Brigo. Good for true understanding, but ...
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### Longstaff and Schwartz example in their paper

I was looking at the well known Longstaff and Schwartz paper "Valuing American Options by Simulation: A Simple Least-Squares Approach". There are a couple of examples where they applied the ...
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### Vasicek Short rate simulation - analytical formula vs discretization

I've been using two approaches to simulate Vasicek short rate paths and I'm wondering if one of them is more correct than the other. The first approach is based on the analytical formula (see code ...
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### Hull & White 1F - What is the appropriate calibration portfolio for Libor indexed structured note?

I'm wondering what is the best swaptions or caps portfolio I could use to calibrate the two parameters of H&W 1F model for a structured note with optionality on Libor underlying. Let's suppose ...
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### Derive the discount bond prices of the Vasicek model by the PDE approach

The question is shown above. Anyone can help me?
1 vote
211 views

### How to solve these SDE Problems

Quuestion1. I make a solution $r(t)$ used by Ito's lemma $r(t)=e^{-a t}r(0)+\int _{0}^{t}e^{a (s-t)}\theta (s)ds+\sigma e^{-a t}\int _{0}^{t}e^{a u}\,dB^{1}(u)$ Is this right? and I try to make ...
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### Correlation between Two Factor Gaussian Shortrate Model and Black Scholes Model

I want to implement a two factor Gaussian Shortrate Model \begin{align} r(t) & = x(t) + y(t) + \phi(t), \\ dx(t) & = -ax(t)dt + \sigma dB_1 (t), \\ dy(t) & = -by(t)dt + \eta dB_2(t), \end{...
1 vote
291 views

### basic difference between interest rate models

I am reading up on interest rate models, but currently confused about difference in the two types of models: no arb models like ho-lee, vasicek etc. others like nelson siegel, pca models etc. While ...
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