R-code for Vasicek estimation
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A short-rate model is usually calibrated to some initial structures in the market, typically the initial yield curve, the caps volatility surface, the swaptions volatility surface, and possibly other products, thus determining the model parameters. Vasicek, Cox Ingersoll Ross (CIR), Dothan, for instance, are among the frequently-used short-rate models. The strength of Vasicek model is analytical bond prices and analytical option prices can be obtained and easily calculatied, however, negative short rates are also possible with positive probability.Want to share your content on R-bloggers? click here if you have a blog, or here if you don't.
R code can be downloaded at http://www.math.ku.dk/~rolf/teaching/mfe04/MiscInfo.html#Code
wiki(Vasicek model)
Tags – vasicek , cox ingersoll ross
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