Ho-Lee model
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In financial mathematics, the Ho-Lee model is a short rate model of future interest rates. It is the simplest model that can be calibrated to market data, by implying the form of <math>\theta_t</math> from market prices.
[edit] The model
The short rate follows a normal process :
- <math>dr_t = \theta_t\, dt + \sigma\, dW_t</math>
[edit] References
- T.S.Y. Ho, S.B. Lee, Term structure movements and pricing interest rate contingent claims, Journal of Finance 41, 1986
- John C. Hull, Options, futures, and other derivatives, 5th edition, Prentice Hall, ISBN 0-13-009056-5
[edit] External links
- Valuation and Hedging of Interest Rates Derivatives with the Ho-Lee Model, Markus Leippold and Zvi Wiener, finance.wharton.upenn.edu
Bond market | |
|---|---|
| Types of bonds by issuer | |
| Types of bonds by payout | |
| Derivatives | |
| Pricing | |
| Yield analysis | |
| Credit and spread analysis | |
| Interest rate models | Short rate models · Rendleman-Bartter · Vasicek · Ho-Lee · Hull-White · Cox-Ingersoll-Ross · Chen · Heath-Jarrow-Morton · Black-Derman-Toy · Brace-Gatarek-Musiela |
