- Ho-Lee model
In
financial mathematics , the Ho-Lee model is ashort rate model to predict futureinterest rate s. It is the simplest model that can be calibrated to market data, by implying the form of heta_t from market prices.Model
The short rate follows a normal process ::dr_t = heta_t, dt + sigma, dW_t
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 0-13-009056-5External links
* [http://finance.wharton.upenn.edu/~benninga/mma/ho-lee.pdf Valuation and Hedging of Interest Rates Derivatives with the Ho-Lee Model] , Markus Leippold and Zvi Wiener, finance.wharton.upenn.edu
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