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hwvolspec - Specify Hull-White interest-rate volatility process

Syntax

Volspec = hwvolspec(ValuationDate, VolDates, VolCurve, AlphaDates, AlphaCurve, InterpMethod)

Arguments

`ValuationDate`	Scalar value representing the observation date of the investment horizon.
`VolDates`	Number of points `(NPOINTS)`-by-`1` vector of yield volatility end dates.
`VolCurve`	`NPOINTS`-by-`1` vector or scalar of yield volatility values in decimal form.
`AlphaDates`	`MPOINTS`-by-`1` vector of mean reversion end dates.
`AlphaCurve`	`MPOINTS`-by-`1` vector of positive mean reversion values or scalar in decimal form.
`InterpMethod`	(Optional) Interpolation method. Default is `'linear'`. See `interp1` for more information.

Note The number of points in VolCurve and AlphaCurve do not have to be the same.

Description

Volspec = hwvolspec(ValuationDate, VolDates, VolCurve,AlphaDates, AlphaCurve, InterpMethod) creates a structure specifying the volatility for hwtree.

The volatility process is such that the variance of r(t + dt) - r(t) is defined as follows: V = (Volatility.^2 .* (1 - exp(-2*Alpha .* dt))) ./ (2 * Alpha). For more information on using Hull-White interest rate trees, see Hull-White (HW) and Black-Karasinski (BK) Modeling.

Examples

Using the data provided, create a Hull-White volatility specification (VolSpec).

ValuationDate = '01-01-2004';
StartDate = ValuationDate;
VolDates = ['12-31-2004'; '12-31-2005'; '12-31-2006'; 
'12-31-2007'];
VolCurve = 0.01;
AlphaDates = '01-01-2008';
AlphaCurve = 0.1;

HWVolSpec = hwvolspec(ValuationDate, VolDates, VolCurve,...  
AlphaDates, AlphaCurve)

HWVolSpec = 

             FinObj: 'HWVolSpec'
      ValuationDate: 731947
           VolDates: [4x1 double]
           VolCurve: [4x1 double]
         AlphaCurve: 0.1000
         AlphaDates: 733408
    VolInterpMethod: 'linear'

hwvolspec - Specify Hull-White interest-rate volatility process

Syntax

Arguments

Description

Examples

See Also