Economics Homework Help
University of Miami The Interest Rates Theory Discussion Paper
Please watch the videos below and answer the question below. Response should be no less than 600 words and have at least 4 references.
https://www.youtube.com/watch?v=cfKzEbGsc68
For this assignment, choose two of the following traditional interest rate theories to discuss:
** Local Expectations Theory
** Liquidity Preference Theory
** Segmented Markets Theory
** Preferred Habitat Theory
In your response, describe the underlying economic factors that the theory indicates impacts the shape of the yield curve. Additionally, identify one strength and one weakness of the theory.
Next, compare the two chosen theories to one of the modern interest rate models: Cox-Ingersoll-Ross model or Vasicek model. In your comparison,
* Identify the primary factors that the CIR or V model illustrate impact the yield curve.
* Compare your identified factors for the CIR or V model to the factors identified for the student’s chosen traditional interest rate theory.
*Identify one strength and one weakness of the CIR or V model.
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