An algorithm for arranging response surface designs in small blocks

We consider the problem of blocking response surface designs when the block sizes are prespecified to control variation efficiently and the treatment set is chosen independently of the block structure. We show how the loss of information due to blocking is related to scores defined by Mead and present an interchange algorithm based on scores to improve a given blocked design. Examples illustrating the performance of the algorithm are given and some comparisons with other designs are made. (C) 2000 Elsevier B.V. B.V. All rights reserved.

A two-mean reverting-factor model of the term structure of interest rates

This paper presents a two--factor model of the term structure ofinterest rates. We assume that default free discount bond prices aredetermined by the time to maturity and two factors, the long--term interestrate and the spread (difference between the long--term rate and theshort--term (instantaneous) riskless rate). Assuming that both factorsfollow a joint Ornstein--Uhlenbeck process, a general bond pricing equationis derived. We obtain a closed--form expression for bond prices andexamine its implications for the term structure of interest rates. We alsoderive a closed--form solution for interest rate derivatives prices. Thisexpression is applied to price European options on discount bonds andmore complex types of options. Finally, empirical evidence of the model'sperformance is presented.