QuantLib
A free/open-source library for quantitative finance
Reference manual - version 1.20
Public Member Functions | List of all members
BlackKarasinski::Dynamics Class Reference

Short-rate dynamics in the Black-Karasinski model. More...

#include <ql/models/shortrate/onefactormodels/blackkarasinski.hpp>

+ Inheritance diagram for BlackKarasinski::Dynamics:

Public Member Functions

 Dynamics (const Parameter &fitting, Real alpha, Real sigma)
 
Real variable (Time t, Rate r) const
 Compute state variable from short rate.
 
Real shortRate (Time t, Real x) const
 Compute short rate from state variable.
 
- Public Member Functions inherited from OneFactorModel::ShortRateDynamics
 ShortRateDynamics (const ext::shared_ptr< StochasticProcess1D > &process)
 
const ext::shared_ptr< StochasticProcess1D > & process ()
 Returns the risk-neutral dynamics of the state variable.
 

Detailed Description

Short-rate dynamics in the Black-Karasinski model.

The short-rate is here

\[ r_t = e^{\varphi(t) + x_t} \]

where \( \varphi(t) \) is the deterministic time-dependent parameter (which can not be determined analytically) used for term-structure fitting and \( x_t \) is the state variable following an Ornstein-Uhlenbeck process.