Re: Piecewise constant vol and mean reversion of Hull white

Posted by Ferdinando M. Ametrano-2 on
URL: http://quantlib.414.s1.nabble.com/joint-calendar-tp2345p2353.html

At 11:54 AM 2/13/2003 +0000, you wrote:
>I am wondering if anyone is working on the generalized hull-white
>model?  (i.e.
>with piecewise constant vol and piecewise constant mean reversion?)
No-one I know of

>This allows exact calibration of the diagonal of swaptions and possibly a cap.
You're right, but while piecewise constant vol/reversion allows for a good
fit it is considered to be a questionable over-parametrization that will
produce unreliable implied curve dynamic.
See Rebonato for more details.

I've used the generalized hull-white model in the past, with only 2 levels
of mean reversion: one for the "short" horizon (< 3/5 years), the other for
the long term rate.
I don't think it would make sense to have more knots for mean reversion

This said I would appreciate to have a generalized hull-white model
contributed to QuantLib, at least to study the implied dynamic, even if I
would be using it with constant parameters


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ciao -- Nando