Lattice

Generalized Procedure for Building Short Rate Trees in Excel / VBA

In their 2014 paper John Hull and Alan White derive generalized method for the construction of short rate trees. This generalization is interesting as it allows for one tree (or lattice) construction algorithm for all one factor short rate models. The only difference between the various models is the function H(x,t), which is explained briefly here and in detail in the paper. Continue reading