Tag Info

New answers tagged


A very popular choice for mean reversion is the Ornstein–Uhlenbeck process (here in discretized form): $$L_{t+1}-L_t=\alpha(L^*-L_t)+\sigma\epsilon_t$$ Here you see that the level change is governed by some parameter $\alpha$, the mean reversion rate (or speed), and the distance between the long run mean $L^*$ and the actual level $L_t$ plus some noise. A ...


Have you tried: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1514192 It should cover it, anyway Hull White fits the HJM framework so you should be able to calibrate it to swaptions or something if not the yield curve

Top 50 recent answers are included