We show how to use 'uncertainty' in place of the more traditional Brownian 'randomness' to model a short-term interest rate. The advantage of this model is principally that it is difficult to show statistically that it is wrong. Whether the model is useful for pricing fixed-income products is...

There is an extensive literature on the valuation of a fixed income contracts. The present work addresses the problem from a new outlook: we find upper and lower bounds for the value of a contract. Constraints are imposed on the evolution of a short-term interest rate and a liability is valued...

Two of the authors (DE and PW) recently introduced a non-probabilistic spot interest rate model. The key concepts in this model are the non-diffusive nature of the spot rate process and the uncertainty in the parameters. The model assumes the worst possible outcome for the spot rate path when...