  In this paper we propose a semi-Markov modulated model of interest rates. We
assume that the switching process is a semi-Markov process with finite state
space E and the modulated process is a diffusive process. We derive recursive
equations for the higher order moments of the discount factor and we describe a
Monte Carlo al- gorithm to execute simulations. The results are specialized to
classical models as those by Vasicek, Hull and White and CIR with a semi-Markov
modulation.
