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Mathematical Finance Letters ISSN 2051-2929

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Math. Finance Lett. 2013 (2013), Article ID 5

Drift term and vertex point in single factor interest rate model

Suresh Ramanathan, Kian-Teng Kwek

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Abstract

By using a stochastic differential equation in the form of the Ornstein-Uhlenbeck process, the drift term that is obtained plays a crucial role in determining the vertex point of monetary policy. The drift term, essentially is the same in its structural form for both single factor interest rate models of Vasicek and Cox Ingersoll Ross. Both single factor interest rate models are useful when it comes to measuring the vertex point and vertex point gap of monetary policy transmission.

Published
27 September 2013
Volume
2013 (2013)
License
CC BY 3.0

Copyright © 2013 Suresh Ramanathan, Kian-Teng Kwek. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Cite this article

S. Ramanathan, K.-T. Kwek, Drift term and vertex point in single factor interest rate model, Math. Finance Lett. 2013 (2013), 5.

BibTeX
@article{Ramanathan2013,
  author  = {Ramanathan, Suresh and Kwek, Kian-Teng},
  title   = {Drift term and vertex point in single factor interest rate model},
  journal = {Math. Finance Lett.},
  volume  = {2013},
  year    = {2013},
  pages   = {5},
  doi     = {}
}