# Tagged Questions

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### Acceptable difference of Bermudan Swaption prices computed under 1 Factor Hull-White and Libor Market Model

What is an acceptable difference between the Bermudan swaption prices computed with the 1 factor Hull-White model and the Libor Market model? Details: The set of underlying calibration ...
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### Hull White Stochastic Volatility Model in Matlab

I'm trying to code the Hull White stochastic volatility model using matlab and somewhere my code seems to mess up. I've coded the SABR model as well and that's working fine. When I compare prices ...
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### Whites Reality Check for Pair Trading

I want to use the Monte Carlo Method described in Aronsons book Evidence based Technical Analysis to test if a given pairs trading strategy is useless. First step there is to randomize the returns of ...
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### Consequence of negative mean reversion of hull white one factor model

I tried to calibrate the data for hull-white one-factor model. Sometimes, I get negative estimate of mean reversion factor after the calibration process. When I plug the negative mean reversion factor ...
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### Calibration of 1F Hull White short-rate model to market data

I want to calibrate the Hull White 1 factor short rate model to market data. The main purpose is to simulate interest rate paths, which I will use to calculate the net pv of banking liabilities. Some ...
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### LIBOR rates from Vasicek/Hull-White model?

I am somehow puzzled by the following problem: LIBOR rates are forward rates for an interbank loan for 1M or 3M (let's limit the range of possibilities to these two cases). Assuming that I have ...
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### Hull white tree and the pricing of an interest rate swap

Currently, I have been able to set up the hull white tree. To price the swap, and we use the formula from Wilmott "Introduces Quantitative Finance", where we use the discount factors for all ...
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### Second stage in Hull-white construction of trinomial tree

In Brigo's Interest Rate Models - Theory and Practice, there is a section about constructing a trinomial tree to approximate the short-rate process in Hull-White. In the first stage, the following ...
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### Why is the mean time-dependent in the Hull-White interest rate model?

In the Vasicek interest-rate model, the interest rate reverts to a constant mean. This makes sense to me. In my conception, the mean ought to be time-invariant, since interest rates don't follow an ...
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### Correlate the G2++ with a GBM model

In Matlab one can use the LinearGaussian2F function together with the simTermStructs function to create a simulated zero curve based on the G2++ model. Next to simulating the interest rates I need to ...
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### Function A(t,T) in one-factor Hull-White model

I am struggling with Hull-White model now and have the following question: in the lecture notes under the link below I see how A(t,T) and B(t,T) are being derived. This requires the solution of ...
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### Zero coupon bond pricing under Extended Hull & White

How do you price zero coupon bond in extended Hull & White model by solving the Bond Pricing Equation??
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### Extended Hull White Interest Rate Model for Zero Coupon Bond

Please taking the following SDE dr = u (r; t) dt + w (r; t) dX: u (r; t) = a(t)-br; w (r; t) = c; b&c are constants and a(t) arbitrary function of time. If Zero Coupon Bond Z (r; T; T) = 1 ...
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### Callable bond price sensitivity to Hull-White volatility changes

I'm using classic Hull-White model for short term interest rate dynamic: $$dr(t)=[\theta(t)-\alpha(t)r(t)]dt+\sigma(t)dW(t)$$ (Notation is quite intuitive, anyway I am using the same as Wikipedia ...
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### number of trades - flaw in White Reality Check?

I went through Whites paper of the reality check for multiple strategy testing. To summarize at a simple example: I have 2 strategies, s1 and s2. s1 gives 2 signals and therefore 2 returns, s2 gives ...
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### Historical calibration of Hull-White model

I have a question concerning 1-factor Hull-White model. For my master project I need to calibrate it to compute Counterparty credit risk metrics. I know that the model might be calibrated either for ...
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### Extended CIR and discretization

Did someone know how to discretize this process efficiently : $dX(t) = \kappa [\theta(t)-X(t)]dt + \sigma \sqrt{X(t)}dW(t)$ I am looking for something more sophisticated than the trivial Euler ...
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### Applicability of PCA to get historical volatilities to calibrate interest rates trees

My question in short is as follows: can I take main principal component of historical covariance matrix and use it as historical volatilities when fitting a binomial tree? Here's more detailed ...