With the increased emphasis on market valuation in accounting rules and solvency regulation, the proper modeling of interest rate dynamics has become increasingly important for pension funds. A number of pension fund characteristics make these models particularly demanding. First, as the...

We propose an a±ne term structure model which accommodates non-linearities in the drift and volatility function of the short-term interest rate. Such non-linearities are a consequence of discrete beta-distributed regime shifts constructed on multiple thresholds. We derive iterative closed-form...