The subject of the paper is a thorough empirical analysis of the one-factor interest rate models: the Vasiček Model (1997) and the Cox, Ingersolla and Rossa Model (1985). The study was based on data collected between November 1999 and December 2002 on the Polish T-bond interbank market. The estimation of the parameters for the models in the real probability measure was based on the time-series of the overnight rate, calculated according to the Svensson Model (1994). The "lambda" parameter, which determines the level of the market risk price in both models, was estimated by means of adjusting the theoretical bond-prices to the zero-coupon curve on the basis of the Svensson Model.

The calibrated models served as a basis for the calculation of the market risk price, for the construction of the zero-coupon yield curves and for the estimation of the implied distribution of short-term interest rates.

The analysis led to the three main conclusions. Firstly, in both cases, the estimated parameters reflect the observed overnight rate dynamics adequately. The analysis of the market risk price in particular helped to identify the exact periods when investors showed increased risk aversion. Secondly, due to the significant flattening of the yield-curve, neither of the models analysed is able to serve as a tool for the precise evaluation of interest-rate-based financial instruments. Thirdly, in the light of the methodology of the analysis, the distribution of the short-term interest rate should not be perceived as reflecting market expectations, but rather as prognoses based on historical data.