CFA Level 2
Fixed Income

Understanding the Vasicek Interest Rate Model

Medium Term Structure Dynamics Interest Rate Models

Consider an interest rate model that describes the evolution of interest rates over time, specifically focusing on the Vasicek model. In this model, the short-term interest rate is influenced by three key components: a long-term mean interest rate, a speed of reversion to that mean, and random shocks that introduce volatility. Which of the following statements about the Vasicek model is correct?

Hint

Submitted5.6K
Correct5.4K
% Correct95%