BLACK-DERMAN-TOY MODEL
A one-factor log-normal interest rate model where the single source of uncertainty is the short-term rate. The inputs into the model are the observed term structure of spot interest rates and their volatility term structure. The Black-Derman-Toy model, such as the Ho-Lee model, describes the evolution of the entire term structure in a discrete-time binomial tree framework. The model can be used to price bonds and interest rate-sensitive securities, though the solutions are not closed-form.