Questions tagged [hullwhite]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
2
votes
1answer
223 views

Function A(t,T) in one-factor Hull-White model

I am struggling with Hull-White model now and have the following question: in the lecture notes under the link below I see how A(t,T) and B(t,T) are being derived. This requires the solution of ...
1
vote
0answers
40 views

number of trades - flaw in White Reality Check?

I went through Whites paper of the reality check for multiple strategy testing. To summarize at a simple example: I have 2 strategies, s1 and s2. s1 gives 2 signals and therefore 2 returns, s2 gives ...
2
votes
2answers
3k views

Historical calibration of Hull-White model

I have a question concerning 1-factor Hull-White model. For my master project I need to calibrate it to compute Counterparty credit risk metrics. I know that the model might be calibrated either for ...
4
votes
1answer
498 views

Extended CIR and discretization

Did someone know how to discretize this process efficiently : $dX(t) = \kappa [\theta(t)-X(t)]dt + \sigma \sqrt{X(t)}dW(t)$ I am looking for something more sophisticated than the trivial Euler ...
2
votes
2answers
756 views

Why does the short rate in the Hull White model follow a normal distribution?

Consider Hull White model $dr(t)=[\theta(t)-\alpha(t)r(t)]dt+\sigma(t)dW(t)$ when we solve the SDE above we have $r(t)=e^{-\alpha t}r(0)+\frac{\theta}{\alpha}(1-e^{-\alpha t})+\sigma e^{-\alpha t}\...
3
votes
1answer
1k views

Zero coupon bond pricing under Extended Hull & White

How do you price zero coupon bond in extended Hull & White model by solving the Bond Pricing Equation??
3
votes
1answer
376 views

Calibration of Hull White One factor model in F.C.Park paper

I want to ask a question with reference to a paper from below link http://www.cmpr.co.kr/asset/research_material/implementing_interest_rate_models.pdf Minimization specified in Page 14: Mean ...
3
votes
1answer
348 views

Estimating mean reversion

I've read in some places that mean reversion parameters for a rates model, eg Hull White, can be estimated directly from the current yield curve. However I've not been able to find anything more on ...
5
votes
1answer
1k views

Calibrating Hull-White using volatility data

I would like to calibrate Hull-White model using volatility data.I am using [Park (2004)] paper as a reference. He suggests to minimize the following objective function: where the first term is ...
3
votes
0answers
632 views

Reasoning for Bloomberg's short rate volatilty calculation

Bloomberg, in its documentation, explains that it calculates the short rate volatility for its Hull White implementation by multiplying the e.g. 10y IRS rate (divided by 100) by the 10y cap vol. Why? ...
4
votes
4answers
9k views

Simulating the short rate in the Hull-White model

What is the best way to simulate the short rate $r(t)$ in a simple one factor Hull White process? Suppose I have $$ dr(t) = (\theta(t)-\alpha r(t))dt+\sigma dW_t $$ where $\theta(t)$ is calibrated ...
5
votes
1answer
1k views

How does the 2-factor Hull White model propagate the forward rates curve?

I've been trying to get a grasp on some of the basics of interest rate modeling, and am looking to simulate rates using the 2 factor Hull White model, which I am aware offers a more realistic model of ...
14
votes
2answers
12k views

How to calibrate Hull-White from zero curve?

I am interested in calibrating a Hull-White model to the market. I do not, however, have data on anything except the market zero curves, as all derivatives are being traded OTC. My plan is to ...
4
votes
2answers
1k views

Why is the mean time-dependent in the Hull-White interest rate model?

In the Vasicek interest-rate model, the interest rate reverts to a constant mean. This makes sense to me. In my conception, the mean ought to be time-invariant, since interest rates don't follow an ...
1
vote
1answer
3k views

Normal vs Lognormal Short Rate models

Are there any general arguments to decide whether it is better to use a model with a normal or a lognormal distribution of the short rate? E.g. Hull-White with a normal and Black-Karasinski with a ...
7
votes
1answer
2k views

On short-rate-models: Black-Karasinski (with constant parameters) compared to Vasicek

When modelling the term structure of interest rates, one widespread possibility is using the Black-Karasinski model, which is given by the following stochastic process $$d\ln{r}=[\theta(t)-a(t)\ln{r}]...
16
votes
2answers
950 views

Applicability of PCA to get historical volatilities to calibrate interest rates trees

My question in short is as follows: can I take main principal component of historical covariance matrix and use it as historical volatilities when fitting a binomial tree? Here's more detailed ...
5
votes
1answer
1k views

Reasonable Hull & White parameters

I am using a Hull & White model to simulate forward rates on US swap curve from the 1.10.2012. This is a part of a bigger picture, and I am interested in some reasonable values for the parameters ...