Equilibrium models of the term structure of interest rates, such as Vasicek (1977) and Cox et al. (1985), hereafter CIR, determine the equilibrium yield curve by modelling the dynamics of the short-term interest rate, specifying the market price of risk, and solving the resulting partial...

The paper investigates the term structure of interest rates imposed by equilibrium in a production economy consisting of participants with heterogeneous preferences. Consumption is restricted to an arbitrary number of discrete times. The paper contains an exact solution to market equilibrium and...