Vasicek Model: Pricing Zero-Coupon Bonds in a Stochastic Interest Rate World
Students often mistake the Vasicek model for a Black-Scholes derivative. Crucially, Vasicek is an equilibrium model for the *short rate itself*, not an asset price. Furthermore, the model allows to become negative, which is mathematically convenient but theoretically polarizing in interest rate modeling.
Institutional Reference: Advanced Stochastic Processes
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