Lecture 09Brigo & Mercurio Sections 3.4–3.5
CIR Extensions & BK
Concluding classical one-factor short-rate models with CIR extensions and the Black–Karasinski model: positivity constraints, time-dependent parameters, lognormal short-rate dynamics, exact yield-curve fitting, conditional moments, trinomial tree calibration, and the tradeoffs between realism and tractability.
Lecture Video
Text Coverage
Brigo & Mercurio Sections 3.4–3.5
Brigo & Mercurio, Interest Rate Models, 2nd ed.