A bond pricing formula under a non-trivial, three-factor model of interest rates

In this paper a bond pricing formula is derived under a non-trivial, three-factor model of interest rates. In the model the future short rate depends on (1) the current short rate, (2) the short-term mean of the short rate, and (3) the current volatility of the short rate. In addition, it is assumed that both the short-term mean and the volatility are stochastic.