This paper presents an analytic approximation formula for pricing zero-coupon bonds, when the dynamics of the short-term interest rate are driven by a one-factor mean-reverting process in which changes in the volatility of the interest rate are a function of the level of the interest rate

This paper proposes a simple two-factor model of nominal term structure of interest rates, in which the log-price kernel has an autoregressive drift process and a nonlinear GARCH volatility process. Given these two state-variable processes, closed-form expressions are derived for the zero-coupon...