A long journey
Interest rate derivatives modelling has come a long way since the early, pioneer papers by Vasicek, Cox-Ingersoll-Ross and Hull & White, among others. Riccardo Rebonato charts the key milestones in the journey from Vasicek to today's multi-factor stochastic volatility models
It all began in the late 1970s. It didn't look like much - it was just a collection of curves that could go up or down, but could not even produce a hump. Yet, with the set of apparently unexciting yield curves produced by Oldrich Vasicek in his 1977 paper An equilibrium characterization of the term structure, interest rate derivatives modelling as we understand it today was born.
Tracing step-by
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