One-factor Hull-White Model Calibration for CVA - Part II: Optimizing the Mean Reversion Parameter

7 Pages Posted: 2 Sep 2020

Date Written: July 9, 2020

Abstract

This paper is the second of a multi-part series on the calibration of the one-factor Hull-White short rate model for the purpose of computing CVAs (and xVAs) with an xVA system. The first part introduces an atypical bootstrapping scheme for the calibration of the short rate volatility. The present second part focuses on the selection of the mean reversion parameter. In both expositions we present long-term time series results for EUR, JPY, and USD, covering the period from the beginning of 2009 (at the earliest) to spring 2020.

Keywords: xVA, Hull-White interest rate model, mean reversion parameter calibration, time series

JEL Classification: G

Suggested Citation

Puetter, Christoph M and Renzitti, Stefano, One-factor Hull-White Model Calibration for CVA - Part II: Optimizing the Mean Reversion Parameter (July 9, 2020). Available at SSRN: https://ssrn.com/abstract=3659443 or http://dx.doi.org/10.2139/ssrn.3659443

Christoph M Puetter (Contact Author)

IHS Markit

1066 W Hastings St
Suite 1780
Vancouver, BC V6E 3X1
Canada

Stefano Renzitti

IHS Markit ( email )

1285 West Pender Street
Suite 800, 8th Floor
Vancouver, British Columbia V6E 4B1
Canada

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