What Are the Key Components of a Good Disciplinary Model

question 83

Essay

What are the key components of a good disciplinary model?

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Definitions:

Interest Rate Model

A mathematical model used to forecast future interest rates or to price financial derivatives and manage interest rate risk.

Default Risk Premium

The additional amount a borrower must pay to compensate the lender for assuming the risk of default.

Pure Interest Rate

The earning power of money. An interest rate without an inflation component or premiums for risk.

Inverted Yield Curve

A rare financial situation where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality.