Tag Info

New answers tagged

1

In the Hull-White model, $r_t$ follows the Ito process as described by the following stochastic differential equation $$d{{r}_{t}}=(\alpha (t)-\beta (t)\,{{r}_{t}})dt+\sigma (t)d{{W}_{t}^Q}$$ let $$K(t)=\int_{0}^{t}{\beta (u)\,du}$$ then the zero coupon bond price is given by equation $$p(t\,,T)=exp\,[-A(t\ ,T)-r(t)B(t,T)\,]$$ where \begin{align} & ...


4

Milstein Scheme This scheme is described in Glasserman (2003) and in Kloeden and Platen (1992) for general processes.Hence, for simplicity, we can assume that the Stochastic Process is driven by the SDE \begin{align} &dX_t=\Xi(t,X_t)dt+\Sigma(t,X_t)dW_t\\ \end{align} Milstein discretization is, \begin{align} dX_{t+\Delta ...



Top 50 recent answers are included