A binomial approximation to a diffusion is defined as " computationally simple" if the number of nodes grows at most linearly in the number of time intervals. It is shown how to construct computationally simple binomial processes that converge weakly to commonly employed diffusions in financial...

This article develops and estimates a dynamic arbitrage-free model of the current forward curve as the sum of (i) an unconditional component, (ii) a maturity-specific component and (iii) a date-specific component. The model combines features of the Preferred Habitat model, the Expectations...

We test the theory of the term structure of indexed-bond prices due to Cox, Ingersoll, and Ross (CIR). The econometric method uses Hansen's generalized method of moments and exploits the probability distribution of the single-state variable in CIR's model, thus avoiding the use of aggregate...