Vasicek Model
Also called: Vasicek, Vasicek interest rate model
The Vasicek model describes the short interest rate as mean-reverting with constant volatility, the first tractable model of the whole yield curve. Its elegance is analytic: bond prices and many derivatives have closed-form solutions. Its notorious flaw is that rates can go negative — treated as fatal for decades, then quietly vindicated when several central banks pushed policy rates below zero.
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