Does anyone get to know what is the analytical formula for caplets or swaptions in the Hull White model?

matrixpower · August 18th, 2007, 3:16 pm

Hello all Does anyone get to know what is the analytical formula for caplets or swaptions in the Hull White model? I want to use it to calibrate the volatility parameters used in HW model. Thanks a lot!

rplat · August 20th, 2007, 6:44 pm

There is no exact analytical formula, but with a relatively simple numerical exercise you can do the method of jamshidian, that is given in most books about interest rate models.Furthermore, a good approximation is given by Schrager & Pelsser.