Transcript Lecture 12

Lecture 12
Course Summary
What You Should Have Learned in this
Course
• Why actuaries need to understand interest rate
models
• How to determine yields, spot rates and
forward rates
• How interest rates have moved in the past
• How to classify interest rate models
What You Should Have Learned in this
Course (p. 2)
• When tree models are appropriate
• What the features of the popular models are:
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Vasicek
Cox-Ingersoll-Ross
Heath-Jarrow-Morton
Hull-White
• How interest rate models have been applied to
value investments and for asset-liability
management
What You Have Added to Your Library
Hull Options, Futures, and Other Derivatives
Fabozzi Valuation of Fixed Income Securities
and Derivatives
Articles on interest rates and interest rate models
What Skills You Should Now Have
• How to calculate yields, spot rates and forward rates
• How to use a tree model to calculate the value of a
cash flow
• How to use a simulation model to value a cash flow
• How to determine which type of interest rate model
is most appropriate for a particular application
• How to select the parameters for an interest rate
model
What’s Next
• Take the final exam so you complete the course
• Pay attention to interest rate movements and
factors that affect interest rates
• Try to use interest rate models in your work
• Contribute to the literature of interest rate
modeling
• Give us feedback on this course and suggestions
for improvement