In 1977, Oldrich Vasicek published his seminal paper “An Equilibrium Characterization of the Term Structure” in the Journal of Financial Economics (November, pp. 177–188). It established the first theoretically rigorous framework for modeling the behavior of interest rates over time. From this starting point, a new path of inquiry has evolved with important implications for all current fixed-income analysis.

In the next few issues of the Financial Analysts Journal, we will showcase a number of articles that highlight important developments in modeling the term structure of interest rates. We start in this issue with two survey articles. The Hong Yan article provides an overview of the theoretical developments found in the literature; the article by David Chapman and Neil Pearson provides a review of the empirical studies. In subsequent issues, we will have additional articles from leading fixed-income researchers who extend the coverage of this important area.

The mission of the FAJ is to publish high-quality research relevant to the practitioner. Term-structure modeling is an area that is fundamental to the understanding and analysis of interest rates and one that has a rich theoretical and empirical foundation.

I would like to extend a special thanks to the authors who participated in this effort, which is intended to provide a sound reference perspective and stimulate application based on state-of-the-art research.