Estimating Mean Reversion in Hull–White Rates Models

Summary

The question asks whether the mean-reversion parameter in a short-rate model such as Hull–White can be inferred directly from the current yield curve. The response points readers toward a paper on the topic and notes that Hull–White fits within the Heath–Jarrow–Morton framework, where calibration to interest-rate options such as swaptions is another possible route.

The exchange offers pointers rather than an estimation procedure, derivation, or comparison of methods. It does not explain how yield-curve data identify mean reversion, provide empirical evidence, or discuss calibration assumptions and limitations. Treat it as a starting point for further reading, not a complete guide to parameter estimation.

Key ideas

• The question concerns estimating mean reversion in a Hull–White interest-rate model from the yield curve.
• The answer directs readers to further reading on the estimation problem.
• Hull–White can also be calibrated within the HJM framework using instruments such as swaptions.
• The exchange does not provide a worked method or evidence comparing calibration approaches.

Tags

# Estimating mean reversion


# Estimating mean reversion












I've read in some places that mean reversion parameters for a rates model, eg Hull White, can be estimated directly from the current yield curve. However I've not been able to find anything more on this. Any pointers on where to look?

## Answer by Drew (score 2, accepted)

https://quant.stackexchange.com/a/16521

Have you tried:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1514192

It should cover it, anyway Hull White fits the HJM framework so you should be able to calibrate it to swaptions or something if not the yield curve

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.