04-24-2002, 02:21 AM
if the single factor in the model is the short rate, and the drift of interest rates process is the expected change in the short rate, where do you get these short rates? i know how to get forward rates from spot rates & vice versa (pure / unbiased expectations theory's return to maturity). but are we supposed to get these rates through simulation (monte carlo / deterministic / random)? interest rate generators? i don't remember reading it in the book.