Faculty of Mathematics and Physics, Comenius University
Mathematics of Economy and Finance










EQUILIBRIUM AND NO-ARBITRAGE MODELS
OF THE TERM STRUCTURE
MASTER THESIS


Supervisor:	Professor Dr. Engelbert J. Dockner
Master student:	Zuzana Vavrovicova
	Bratislava 1999

CONTENTS

I.	Introduction	2
		
II.	The need for the term structure models	2
	2.1 The motivation for term structure models	2
	2.2 Principal definitions	3
		
III.	One-factor models of the term structure	6
	           3.1 General form of one-factor models	6
	           3.2 The derivation of the Vasicek and CIR models	8
	           3.3 The Ho and Lee model	15
		
IV.	Econometric estimation of one-factor models	17
	           4.1 Concept and notation	17
	4.2 Discrete-time version of the Vasicek model	20
	4.3 Discrete-time version of CIR model	23
	4.4 Discrete-time version of the Ho and Lee model	25
		
V.	Fitting models to the data	28
		
VI. 	Conclusion	30
		
VII.	Resume (in Slovak)	32
		
	Bibliography	34