Abstract
One of the most active areas of research in financial economics has been the modeling of the term structure of interest rates and its relationship to the pricing of contingent claims. There is a vast array of issues in the area, as well as a variety of perspectives, ranging from theoretical to practical. This paper provides a general framework for the analysis of issues in the modeling of the term structure. Specifically, this paper provides an overview of the conceptual issues and the empirical evidence in the area based on an examination of five seminal models by: Black-Scholes-Merton, Vasicek, Cox-Ingersoll-Ross, Ho- Lee and Heath-Jarrow-Morton. The paper provides a synthesis of the area and suggests directions for future research.
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