Published Online: 15 MAY 2010
Copyright © 2010 John Wiley & Sons, Ltd. All rights reserved.
Encyclopedia of Quantitative Finance
How to Cite
Cuchiero, C., Teichmann, J. and Filipovic, D. 2010. Affine Models. Encyclopedia of Quantitative Finance. .
- Published Online: 15 MAY 2010
Affine term structure models have gained significant attention in the finance literature, mainly due to their analytical tractability and statistical flexibility. The aim of this article is to present both theoretical foundations and empirical aspects of the affine model class. Starting from the original one-factor short-rate models of Vasiček and Cox et al., we provide an overview of the properties of regular affine processes and explain their relationship to affine term structure models. Methods for securities pricing and for parameter estimation are also discussed, demonstrating how the analytical tractability of affine models can be exploited for practical purposes.
- affine term structure;
- affine process;
- characteristic function;