Hull-White Vol From Blacks Vol?

gnatty8 · March 30th, 2005, 8:54 pm

Stupid question. If we know swaption implied vols from Black's, is there any easy way to convert this into Hull-White vol without fitting Hull-White to market prices, even a general rule of thumb?

alisa · October 4th, 2005, 5:48 pm

did you manage to get an answer? i would be interested to know too.thanks

pabo · October 6th, 2005, 9:13 am

HW uses the variance of the returns with a mean reversion factor and BS uses the variance of the log of returns.Assuming that the mean reversion factor is a controlling parameter, then does it make sense to say that HW should be a bit bigger than BS vol * Underlying price. Pabo

cosmologist · October 6th, 2005, 2:09 pm

BS prices will be all over the place for different scheme of processes to calculate vol. HW are more stable. ATM values are stable for both. OTM ones would be so different that you would be surprised if the theories are any good. USE HW in most of the cases. I am talking about the stoch vol paper of HW.regardscosmo

Sofiane · October 10th, 2005, 12:17 pm

hey all, I 'm reading the post, maybe I'm out, but technically, you use BS not as a model but as a function to infer IV from the HW model, Sofiane.

Sofiane · October 10th, 2005, 12:17 pm

hey all, I 'm reading the post, maybe I'm out, but technically, you use BS not as a model but as a function to infer IV from the HW model, Sofiane.