CONTENTS

I. Introduction 2

II. The need for the term structure models 2

2.1 The motivation for term structure models 2

2.2 Principal definitions 3

III. One-factor models of the term structure 6

3.1 General form of one-factor models 6

3.2 The derivation of the Vasicek and CIR models 8

3.3 The Ho and Lee model 15

IV. Econometric estimation of one-factor models 17

4.1 Concept and notation 17

4.2 Discrete-time version of the Vasicek model 20

4.3 Discrete-time version of CIR model 23

4.4 Discrete-time version of the Ho and Lee model 25

V. Fitting models to the data 28

VI. Conclusion 30

VII. Resume (in Slovak) 32

Bibliography 34