Two extensions for fitting discrete time term structure models with normally distributed factors

This paper provides extensions to procedures for the implementation of two well-known term structure models. In the first part, a misleading implication given in two textbooks concerning the ability to fit a Ho-Lee type term structure tree through trial and error is corrected, and it is shown that the tree can be fitted precisely with a simple and easily programmable formula. In the second part, a previously published result that obtains the drift for a single-factor discrete time Heath-Jarrow-Morton model is extended to a multi-factor world. In both cases numerical examples are provided.