by Matthew Lorig, Tim Leung
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Suggested foundations for rates and fixed income and volatility models and surfaces. Specialist prerequisites vary by paper.
Understand discounting in a stochastic-rate model.
Translate yield movements into first-order price risk.
Follow diffusion-based models and their assumptions.
Separate conditional volatility from observed returns.
Build a consistent discount curve.
Study a tractable mean-reverting rate model.
Study a correlated stochastic-variance model.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.