Lecture 9 : Interest rate theory 2 Term structure models

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Lecture 9 Interest rate theory 2 / Term
structure models
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Major disadvantage of the model Interest rate
can become negative !
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Besides these there are model where the Bond
prices are modelled directly.
To summarize, we have
1.) Models where the forward rate is modelled.
2) Models where the short rate is modelled.
3) Models where Bond prices are modelled
directly.
Another call of models include the multi factor
models, which we are not going to discuss here.