Bond pricing lacks a canonical model equivalent to the stock log-normal random walk

Evidence

Bonds are more complicated than stocks from the viewpoint of mathematical modeling. There is no single dominant model of interest-rate fluctuations equivalent to the log-normal random walk for stocks. The value of a bond at maturity is a deterministically fixed, not a stochastic, sum of money, and yield curves are both complex and subject to radical changes in shape. — Donald MacKenzie, An Engine, Not a Camera, 964

Categorization

• QUESTION: Worth chasing: which bond models ultimately emerged in the 1980s and how they differed from Black-Scholes-style stock modeling? Invites a follow-up in the next chapter.
• XREF: The contrast with the canonical stock models echoes the earlier Black-Scholes and log-normal-random-walk chapters in this same book. — connects to: Convertible bonds traded at prices inconsistent with Black-Scholes option valuations — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 967

Broader Connections

• Convertible bonds traded at prices inconsistent with Black-Scholes option valuations #exemplifies (0.85) — Donald MacKenzie, An Engine, Not a Camera, 967