Classical interest rate models were formulated under the no-arbitrage assumption of a unique yield curve. However, in the outbreak of the 2007 global financial crisis, market interest rates witnessed unprecedented segmentation, and this instigated the modelling of a basis spread, whose...

The most important result in this working paper is the construction of a multidimensional Gaussian interest-rate term structure model, where, based on a construction of equivalent martingale measures and a suitable selection of numerators, it is shown that it is possible to derive analytical...

This paper deals with issues related to the choice of the interest rate model to price interest rate derivatives. After the development of the market models, choosing the interest rate model is become almost a trivial task. However their use not always is possible, so that the problem of...