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Simulating interest rates with the Vasicek model

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created by: Thijs van den Berg (http://www.sitmo.com)
Simulating interest rates with the Vasicek model equation

This equation is the exact solution of the one-factor Vasicek interet rate model. In this model interest rates are Normal distributed, and thus can become negative.

List of symbols

Initial value at t=0 of the interest rate
Value of interest rate at time t
Mean reversion rate
Mean reversion level
Random sample from a normal (Gaussian) distribution with mean 0 and standard deviation 1.

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