I have looked into the analytics for callable bonds lately [1][2]. The involves the use of an interest rate tree. I thus implemented the Hull-White and Black-Karasinski one-factor short rate trees illustrated in Hull’s Options, Futures and Other Derivatives 6th Ed. Ch28.7. I included procedures to calibrate the rates tree using the premium of interest rate cap. Once a tree is generated, it can be used to price and calculate the OAS for callable bonds (both fixed and floating rate with flexible call schedule).
- Author: David Y
- Date of first release:2014-08-03
- Version: 1.0.0
- License: BSD
- Language: C# (tested in VS Express 2013 for Desktop)
- Model: Hull-White and Black-Karasinski one-factor short rate trees
- Dependence: ALGLIB numeric library (for optimisation code)
