hi, it would be very kind of someone to clear this doubt of mine the general convexity adjustment formula between forward and future is exp( int_u=0^u=t1 ( b(u,t2) - b(u,t1) )*b(u,t2) du ) wher b(u,t) is the bond volatility = - int_s=u^s=t sigma(u,s) ds where sigma(u,s) is the general volatility under the HJM model. now for ho- lee model sigma(u,s) = sigma ( a constant). hence the bond volatility of the Ho lee model under HJM framework is b(u,t)=-sigma*(t-u) hence the convexity correction formula becomes: exp( sigma^2 (t2-t1) int_u=0^u=t (t2-u) du ) now this does not simplyfy to the ususal (sigma^2 t2*t1)/2 formula given in hull-white book. can someone please point out where i am going wrong. any help would be greatly appreciated.

If memory serves me correct, you can probably find a thorough derivation of this stuff in Flesaker, Bjorn. "Arbitrage Free Pricing Of Interest Rate Futures And Forward Contracts," Journal of Futures Markets, 1993, v13(1), 77-92. Look for equations [11] and [25]. And sorry, I cannot provide you with a copy.

int_u=0^u=t1 (t2-u) du equals to t1*t2/2 , so that's where this part of the term comes from.I'm not sure about this one, though, but in your general convexity adjustment rule, is it possible you miss the 1/(t2-t1) factor and the -1 as in1/(t2-t1)*( exp( int_u=0^u=t1 ( b(u,t2) - b(u,t1) )*b(u,t2) du ) -1)which gives the approximation in hull's book.