State space decomposition and classification of term structure shapes in the two-factor Vasicek model
Mathematical Finance
2023-03-27 v1
Abstract
Using the concept of envelopes we show how to divide the state space of the two-factor Vasicek model into regions of identical term-structure shape. We develop a formula for determining the shapes utilizing winding numbers and give a nearly complete classification of the parameter space regarding the occurring shapes.
Cite
@article{arxiv.2303.13966,
title = {State space decomposition and classification of term structure shapes in the two-factor Vasicek model},
author = {Martin Keller-Ressel and Felix Sachse},
journal= {arXiv preprint arXiv:2303.13966},
year = {2023}
}