Multi-Instrument Calibration: Fitting Vasicek Parameters to the Entire Yield Curve
The Vasicek model is a specific application of the Ornstein-Uhlenbeck process in the context of interest rate modeling.
The Vasicek multi-instrument calibration model resolves a fundamental weakness in interest rate modeling by forcing a single coherent set of parameters — mean reversion speed, long-run equilibrium, and volatility — to simultaneously explain the entire yield curve from overnight rates to 30-year bonds, rather than fitting to any one instrument in isolation.
I created a Vasicek multi-instrument calibration model, explained its limitations and extensions.
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The Python code is uploaded into https://github.com/AIMLModeling/Vasic...