Arbitrage Free Vs Equilibrium Term Structure Models
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1. Context
In this short video from FRM Part 2 curriculum, we differentiate between two categories of Term Structure Models – ‘Arbitrage Free’ models and ‘Equilibrium Models’. The details of the readings in which this topic appears are given below:
| Area | Market Risk |
| Reading | The Evolution of Short Rates and the Shape of the Term Structure |
| Reference | Bruce Tuckman and Angel Serrat, Chapter 8. The Evolution of Short Rates and the Shape of the Term Structure In Fixed Income Securities, 3rd Edition, (Hoboken, NJ: John Wiley & Sons, 2011). |