  We discuss a simple extension of the Ho and Lee model with generic
time-dependent drift in which: 1) we compute bond prices analytically; 2) the
yield curve is sensible and the asymptotic yield is positive; and 3) our
analytical solution provides a clean and simple way of separating volatility
from the drift in the short-rate process. Our extension amounts to introducing
one or two reflecting barriers for the underlying Brownian motion (as opposed
to the short-rate), which allows to have more realistic time-dependent drift
(as opposed to constant drift). In our model the spectrum -- or, roughly, the
set of short-rate values contributing to bond and other claim prices -- is
discrete and positive. We discuss how to calibrate our model using empirical
yield data by fitting three parameters and then read off the time-dependent
drift.
