Interest Rate Modelling (Finance and Capital Markets Series)
14.1 Initial Term Structure
Following the notation and methodology of Chapter 8 §8.5.1, the initial term structure of interest rates and interest rate volatilities is described by the following variables :
| P ( i ) | - | time 0 price of a discount bond maturing at time i ” t , |
| R ( i ) | - | time 0 (continuously compounded) yield on a discount bond maturing at time i ” t , |
| ƒ R ( i ) | - | time 0 volatility of yield R ( i ). |