What are some of the common forward vol specifications under HJM framework used in the industry. I guess most common would be 2 and 3 factor models, but any pointers to more details would be very useful. An example would be - parametric instantaneous forward rate vol as sum of two exponential decaying vols (same as G2++ model).

PS: could you please also point to any references on the model calibration as well.

Thanks for your help!

  • 1
    $\begingroup$ Do you have a reference for such specification? $\endgroup$ – Gordon Nov 17 '16 at 20:57
  • $\begingroup$ Here is the link to G2++ model I mentioned as an example. There seem to be lot of different ways to specify the vol, I am keen to know which ones are popular in the industry. $\endgroup$ – InnocentR Nov 18 '16 at 20:17
  • 1
    $\begingroup$ I used HJM within the industry for a long time. The vol specification I used became more refined over time and was quite complex (multi parameter). I'm sure we never published it, since it is a competitive advantage. $\endgroup$ – dm63 Nov 19 '16 at 12:32
  • $\begingroup$ @dm63 I totally see that people might not want to share precise details. Could you please point to any publicly available literature that could help cover some ground. $\endgroup$ – InnocentR Nov 20 '16 at 14:21

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.