The Vasicek model (*Vasicek, 1977*) is a continuous, affine, one-factor stochastic interest rate model. In this model, the instantaneous interest rate dynamics are given by the following stochastic differential equation:

Here, α, β, and σ are positive constants, *r _{t}* is the interest rate,

As you may observe, the interest rate in the Vasicek model follows a mean-reverting process with a long-term average *β*; when *r _{t} < β*, the drift term becomes positive, so the interest rate is expected to increase and vice versa. ...

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