Publication: Efficient Calibration of Trinomial Trees for One-Factor Short Rate Models
Efficient Calibration of Trinomial Trees for One-Factor Short Rate Models
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Leippold, M., & Wiener, Z. (2004). Efficient Calibration of Trinomial Trees for One-Factor Short Rate Models. Review of Derivatives Research, 7(3), 213–239. https://doi.org/10.1007/s11147-004-4810-8
Abstract
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In this paper we propose a computationally efficient implementation of general one factor short rate models with a trinomial tree. We improve the Hull-White's procedure to calibrate the tree to bond prices by circumventing the forward rate induction and numerical root search algorithms. Our calibration procedure is based on forward measure changes and is as general as the Hull-White procedure, but it offers a more efficient and flexible method of constructing a trinomial term structure model. It can be easily implemented and calibrate
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- Wiener, Zvi
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Leippold, M., & Wiener, Z. (2004). Efficient Calibration of Trinomial Trees for One-Factor Short Rate Models. Review of Derivatives Research, 7(3), 213–239. https://doi.org/10.1007/s11147-004-4810-8
