Gaussian 1d Model


Gaussian 1d Model is an abstract type and also direct subtype of Model[Short Rate]
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with functions Gaussian 1d Model Functions and direct subtypes Gaussian 1d Model subtypes

TYPE INCLUSION RELATIONSHIPS

Model Short Rate

Gaussian 1d Model

GSR Model

Markov Functional

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AVAILABLE FUNCTIONS

Calc Quantities

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This type represents various types of one factor gaussian short rate models.
Be aware of a major shortcoming of all such models with regard to their ability to price products that depend heavily on the difference of two rates, such as a FltFlt Swaption with two different indices.
Due to the perfect correlation between all possible interest rates, a product paying the difference of two rates would appear to be almost insensitive to volatility changes.
Thus zero option prices could be produced even when the input volatility were set to very high values.