I have a problem and I hope someone could help me.
I calibrated the Hull-White model to Caps and Floors from t=0 so the bond prices are equivalent to todays term structure. See: Hull-White zero-coupon bond price does not depend on the volatility?
For Caps it prices them correctly using the OIS curve as the term structure. But I get huge mispricings for Floors.
The mispricing mostly appears for the first 2-5 Caplets and later it disappears.
Do you have an idea what the problem could be, or do I have a fundamental mistake?
I am just calibrating the HW model to Cap and Floor prices.
Thanks in advance Chris