Help: vol of zero coupon bond price in hull white model
Posted: August 10th, 2006, 11:24 am
we know the vol of ZCB in hull white model is sigma*(1-exp(-a*M))/awhere a is mean reversion parameter, it should be near to 0, like 1% or 2%, and M is maturity of ZCB.so if M is long, say 20 years, this vol is quite high, why is happen? can we use this model to work out long term vol of ZCB?feel free to comment. thanx