The Hull-White model

This video provides an introduction to the Hull–White interest rate model, a widely used short-rate model in quantitative finance. The Hull–White framework extends the Vasicek model by introducing time-dependent parameters, allowing the model to fit exactly to the current term structure of interest rates while retaining a mean-reverting stochastic dynamic. The discussion covers the motivation for short-rate modeling, the mathematical formulation of the Hull–White model, and the role of mean reversion and Brownian motion in driving interest rate dynamics. The video also explains why the ability to calibrate to today’s yield curve is critical for pricing interest rate derivatives such as swaps, caps, and swaptions. This presentation is intended for viewers with an interest in quantitative finance, stochastic processes, and interest rate modeling, and assumes familiarity with basic probability theory and stochastic calculus. References: * Clewlow & Strickland, Implementing Derivative Models: https://www.amazon.com/Implementing-Derivative-Models-Clewlow/dp/0471966517 * Brigo & Mercurio, Interest Rate Models: Theory and Practice: https://link.springer.com/book/10.1007/978-3-540-34604-3 * Trigeorgis, Real Options Valuation: https://www.amazon.de/Real-Options-Valuation-Importance-Modelling/dp/3642126618 Related videos: * Quadratic Variation for Brownian Motions: https://youtu.be/skIcIJ91zlk * Europe’s Plan to Foster AI Development: https://youtu.be/5pFCddcllo0 * BERT and XLNet for Asset Classification: https://youtu.be/7eJ4QQRI7DA