Worst case

Interest Rate Modeling Without Probabilities

Every interest rate model you have seen so far in this book assumes some form of random process. Brownian motion, mean reversion, stochastic volatility. They all start with “assume interest rates follow this stochastic differential equation” and then build a pricing framework on top. Chapter 68 of Wilmott’s book throws all of that out the window. No random walks. No probability distributions. No volatility parameters. Just bounds. This is the Epstein-Wilmott model, and it is refreshingly different.

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