Consider the Hull-White model with SDE dr t = ,(t)((t) r t )dt + (t)dW t
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Consider the Hull-White model with SDE drt = κ,(t)(θ(t) – rt)dt + σ(t)dWt. Following the same logic as we did in the text, determine θ(t). Can you see why in practice calculating θ(t) directly is not the best approach when implementing the Hull-White model?
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Determining t in the HullWhite Model Assuming a constant mean reversion parameter and timedependent ...View the full answer
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