July 10th, 2004, 11:43 pm
Do you mean the intuition behind it?I am sure you know that a nice reason behnd the n-term affine term structure model is that the yield for a zero coupon bind then becomes *linear* in the n factors. In particular for a one-term model where the short rate r is the term which is affine, the yield is then a linear function of r. (The constants are obtained solving the Ricatti equations)
Last edited by
tosh137 on July 10th, 2004, 10:00 pm, edited 1 time in total.