The purpose of this article is to propose and price a new type of adjustable-rate mortgage: the FIREARM ("Falling Interest Rate Adjustable-Rate Mortgage"). The interest payments on this mortgage adjust downward whenever interest rates decline, while remaining stable when interest rates increase....

This paper presents empirical tests of the constant volatility version of the Heath, Jarrow, and Morton model, which is also the continuous time limit of the Ho and Lee model. Using a generalized method of moments (GMM) test on three years of daily data for Eurodollar futures and futures...