Since markets are showing negative interest rate, I'm forced to find a model that can catch this behaviour. Because of that, I have implemented and calibrated the G2++ (or the Hull-White 2 Factors) for the EURIBOR 6 Months.
The EURIBOR 6M has already been calibrated, but I also need to model the indexes EURIBOR OIS, EURIBOR 3M and EURIBOR 12M at the same time.
Do you know how to model these ibor indexes?
Shall I model the basis spread? or shall I implement also the G2++ for the rest of indexes?
If we implement the G2++ for the rest of indexes and we execute a Monte Carlo, we may get some trouble when indexes twist. I mean, in some cases EURIBOR 3M could become greater than EURIBOR 6M and theoretically it shouldn't be allowed.
Any idea about stochastic basis models?
Thank you very much in advance!