GERALD W. BUETOW, JR., PH.D., CFA
Chief Investment OfficerInnealta Capital
BRIAN J. HENDERSON, PH.D., CFA
Assistant Professor of FinanceThe George Washington University
Interest rate models are important tools used by practitioners for purposes including pricing of fixed income securities, pricing interest rate contingent claims, and evaluation of interest rate risk. Although there are many interest rate models, the models vary by their assumptions regarding interest rate dynamics and their degree of specificity. Due to differing assumptions about the interest rate process, each model has different properties that have important implications for their use in valuation. ...