The Art of Term Structure Models: Drift (FRM Part 2 2025 – Book 1 – Chapter 13) скачать в хорошем качестве

The Art of Term Structure Models: Drift (FRM Part 2 2025 – Book 1 – Chapter 13)

Understand how drift shapes short-rate models and the yield curve. In this FRM Part 2 (Book 1 – Market Risk) lesson, Professor Forjan explains: • What “drift” means in short-rate/term-structure modeling • Interest-rate trees with and without drift • Handling the risk of negative short-term rates • Equilibrium vs. arbitrage-free models (Ho-Lee) • Mean reversion and the Vasicek model (intuition, not formulas) • When each model is useful for pricing, risk, and scenario analysis You’ll see how volatility, calibration, and economic news affect the curve—and how to think about model choice on the exam and at work. For FRM (Part I & Part II) video lessons, study notes, question banks, mock exams, and formula sheets covering all chapters of the FRM syllabus, click on the following link: https://analystprep.com/shop/unlimite... AnalystPrep is a GARP-Approved Exam Preparation Provider for FRM Exams After completing this reading you should be able to: Construct and describe the effectiveness of a short-term interest rate tree assuming normally distributed rates, both with and without drift. Calculate the short-term rate change and standard deviation of the rate change using a model with normally distributed rates and no drift. Describe methods for addressing the possibility of negative short-term rates in term structure models. Construct a short-term rate tree under the Ho-Lee Model with time-dependent drift. Describe uses and benefits of the arbitrage-free models and assess the issue of fitting models to market prices. Describe the process of constructing a simple and recombining tree for a short-term rate under the Vasicek Model with mean reversion. Calculate the Vasicek Model rate change, standard deviation of the rate change, expected rate in T years, and half-life. Describe the effectiveness of the Vasicek Model. 0:00 Introduction 1:37 Learning Objectives 2:26 Introduction - Terminologies 3:40 Model 1 - Normally Distributed Rates 8:21 Model 1 - Interest Rate Tree Without Drift 13:30 Methods for Addressing the possibility of Negative Short-Term Rates 14:53 Model 2 - Constant Drift 16:45 2-period Interest Rate Tree with Drift (Model 2) 20:25 Interest Rate Tree under the Ho-Lee Model 20:48 Uses and Benefits of Arbitrage-Free Models 24:14 Equilibrium Short-Rate Models 26:05 Vasicek Model (1/2) 30:11 Non-Recombining Tree under the Vasicek Model (2/5) 32:10 Mean Reversion in the Vasicek Model 34:21 Effectiveness of the Vasicek Model 35:13 Implication on Economic News #FRM #GARP #MarketRisk #FixedIncome #YieldCurve #QuantFinance #RiskManagement #HoLee #Vasicek #AnalystPrep