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| Author: | Grant, D. Vora, G. |
| Title: | The Hull and White model of the short rate: an alternative analytical representation |
| Journal: | Journal of Financial Research
2002 : WINTER, VOL. 25:4, p. 463-476 |
| Index terms: | Interest rates Monte Carlo technique |
| Freeterms: | Short rate |
| Language: | eng |
| Abstract: | Ho and Lees no-arbitrage model of the short interest rate is extended by Hull and White to include mean reversion. The problem of negative interest rates is eliminated by this addition and has found wide application. To implement their model, Hull and White employ a sequential search process to identify the mean interest rate in a trinomial lattice at each date. In this study, Hull and Whites work is extended by developing an analytical solution for the mean interest rate at each date. |
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