# Tag Info

## Hot answers tagged calibration

10 votes
Accepted

### Breeden-Litzenberger formula for risk-neutral densities

I assume that for approximating the second derivative of the call price $C (K,T)$ at the bounds of the strike domain (see first 2 "if" cases of the last for loop of your code) you tried to set up ...
• 13.9k
9 votes
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### How to get set the theta function in the Hull-White model to replicate the current yield curve

Concerning your first question, this depends on what curve, currency, etc. you are interested in. The general method for constructing yield curves is called bootstrapping which allows you to derive ...
• 7,091
8 votes
Accepted

• 9,077
4 votes

### ATM i.r. Caps - Black vol calibration

Because these are ATM Swaps, strike rates should be equal to the Swap rates which can be computed off the forward curves
4 votes

### Is a common approach to calibration reasonable?

I am intrigued by this question because it gets at the heart of so many grey areas of the financial system in which it becomes almost impossible to know how many assets derive their values from some ...
• 2,825
4 votes

### Why Hull White 2 Factor model can't capture vol skew?

Local and/or stochastic vol extensions of HW (incl. multi-factor) were produced around the mid 1990s, more or less independently in a number of research papers, the most notable being Cheyette (1992) ...
4 votes
Accepted

### Instruments for calibrating Hull White Model

I assume you are asking for the popular Hull/White one-factor model. You could eiter calibrate them to Cap/Floor Volas or to swaption volas. Don't try to fit a model to both at the same time. You ...
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4 votes
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### why calibrate volatility and fix the mean reversion

Fixing the mean reversion, and parameterizing the volatility as a step function or as a piecewise linear function, the volatility can be bootstrapped exactly to a set of vanilla options sorted by ...
• 5,532

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