Standard Article

Affine Models

  1. Christa Cuchiero,
  2. Josef Teichmann,
  3. Damir Filipovic

Published Online: 15 MAY 2010

DOI: 10.1002/9780470061602.eqf11029

Encyclopedia of Quantitative Finance

Encyclopedia of Quantitative Finance

How to Cite

Cuchiero, C., Teichmann, J. and Filipovic, D. 2010. Affine Models. Encyclopedia of Quantitative Finance. .

Author Information

  1. Vienna University of Technology, University of Vienna and Vienna University of Economics and Business Administration, Vienna, Austria

Publication History

  1. Published Online: 15 MAY 2010

Abstract

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.

Keywords:

  • affine term structure;
  • affine process;
  • characteristic function;
  • pricing;
  • estimation