Affine term structure model: Difference between revisions

Revision as of 18:43, 6 February 2023

Revision as of 18:43, 6 February 2023

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{{expert-subject|1=Finance & Investment|date=December 2012|reason=Confirmation, details on the Affine Term Structure Model.}}

An '''affine term structure model''' is a [[financial model]] that relates [[zero-coupon bond]] prices (i.e. the discount curve) to a [[spot rate]] model. It is particularly useful for deriving the [[yield curve]] – the process of determining spot rate model inputs from observable [[bond market]] data. The affine class of term structure models implies the convenient form that log bond prices are linear functions of the spot rate<ref>{{Cite journal|last1=Duffie|first1=Darrell|last2=Kan|first2=Rui|date=1996|title=A Yield-Factor Model of Interest Rates|journal=Mathematical Finance|language=en|volume=6|issue=4|pages=379–406|doi=10.1111/j.1467-9965.1996.tb00123.x|issn=1467-9965}}</ref> (and potentially additional state variables).

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See also

additional state variables).

== Background ==