In financial mathematics, the Ho-Lee model is a short rate model to predict future interest rates. It is the simplest model that can be calibrated to market data, by implying the form of θ_t from market prices. Ho and Lee does not allow for mean reversion.

[edit] Model

The short rate follows a normal process :

[edit] References

• T.S.Y. Ho, S.B. Lee, Term structure movements and pricing interest rate contingent claims, Journal of Finance 41, 1986
• John C. Hull, Options, futures, and other derivatives, 5th edition, Prentice Hall, ISBN 0-13-009056-5

[edit] External links

• Valuation and Hedging of Interest Rates Derivatives with the Ho-Lee Model, Markus Leippold and Zvi Wiener, finance.wharton.upenn.edu

v • d • e Bond market Bond · Debenture · Fixed income Types of bonds by issuer Agency bond · Corporate bond (Senior debt, Subordinated debt) · Distressed debt · Emerging market debt · Government bond · Municipal bond · Sovereign bond Types of bonds by payout Accrual bond · Auction rate security · Callable bond · Commercial paper · Convertible bond · Exchangeable bond · Fixed rate bond · Floating rate note · High-yield debt · Inflation-indexed bond · Inverse floating rate note · Perpetual bond · Puttable bond · Reverse convertible · Zero-coupon bond Bond valuation Clean price  · Convexity  · Coupon yield  · Credit spread  · Current yield  · Dirty price  · Duration  · Nominal yield  · Yield to maturity Securitized products Asset-backed security · Collateralized debt obligation · Collateralized mortgage obligation · Commercial mortgage-backed security · Mortgage-backed security  · Yield-curve spread Bond options Callable bond  · Convertible bond  · Embedded option  · Exchangeable bond  · Option-adjusted spread  · Puttable bond  · Z-spread Institutions Commercial Mortgage Securities Association (CMSA) · International Capital Market Association (ICMA) · Securities Industry and Financial Markets Association (SIFMA)

This economics or finance-related article is a stub. You can help Wikipedia by expanding it. v • d • e