Short-rate model

A short-rate model is a type of interest rate model used primarily in finance to describe the evolution of interest rates over time. In these models, the "short rate" refers to the interest rate for a very short time period, typically treated as a single period (like one day) or the instantaneous interest rate. The key feature of short-rate models is that they focus on modeling this single rate rather than the entire yield curve or longer-term rates directly.