**Reading Source:** ERM-602-12 Study Note

**Topics Covered in this Reading:**

- Categorization of Approaches to Term Structure Modeling
- Equilibrium Modeling
- Risk Neutral Probabilities: The Derivative Pricing Probability Measure
- Realistic Probabilities: The Estimated Market Probability Measure
- When Do I Use Each of the Modeling Approaches?
- Risk Neutral and Arbitrage Free
- Risk Neutral and Equilibrium

- Using Models of Borrower Behavior with a Risk Neutral Interest Rate Model
- Realistic and Arbitrage Free
- Realistic and Equilibrium

- Summary of the Four Faces