When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.

The real challenge was to model all the interest rates simultaneously, so you could value something that depended not only on the three-month interest rate, but on other interest rates as well.

Low interest rates benefit individuals or investors who own or want to buy assets; in that regard, they disproportionately benefit wealthier Americans.

moving in the right direction.

Briefly speaking, our conclusion is that stochastic volatility does not make a huge difference as far as the pricing is concerned if you get the average volatility right. It makes a big difference as far as hedging is concerned.

This number combined with the other high numbers is going to force the government to keep interest rates high and make sure the budget is austere for the next year. High rates are bad news for equity holders.