Model Validation: Proof that 1-factor Interest Rate Models Underestimate Risk by 61% to 83%

Model Validation: Proof that 1-factor Interest Rate Models Underestimate Risk by 61% to 83% Donald R. van Deventer[1] First version: March 17, 2020 This version: March 23, 2021 Abstract We use daily observations of the U.S. Treasury yield curve from 1962 to 2020 to construct two state of the art Heath, Jarrow and Morton term … Continue reading Model Validation: Proof that 1-factor Interest Rate Models Underestimate Risk by 61% to 83%