Distribution of Future Short & Reversion Rates in the 2-Factor Vasicek Model
Document ID: 2000-40 (previously 2000/030)
Published on: 1st November 2000
Author: Craig Turnbull
In this note we derive the probability distributions of the short rate and mean-reversion level in the 2-factor Vasicek model. Knowledge of these distributions allows us to simulate the path taken by the rates without any need for approximations. NOTE: The results of this document also apply, with some minor modification, to the 2-factor Black-Karasinksi model.
