TY - JOUR T1 - Improving Discrete Implementation of the Hull and White Two-Factor Model JF - The Journal of Fixed Income SP - 67 LP - 75 DO - 10.3905/jfi.2005.491116 VL - 14 IS - 4 AU - Matthias Muck AU - Markus Rudolf Y1 - 2005/03/31 UR - https://pm-research.com/content/14/4/67.abstract N2 - This research analyzes the convergence properties of a discrete implementation of the Hull and White two-factor model. It compares caplet prices using both the discrete valuation algorithm and the analytic solution. Quality of the results depends crucially on the properties of the model parameters. The valuation algorithm may be improved while preserving its computational efficiency. An application of the modified algorithm to the caplet pricing problem indicates that substantially reduced valuation errors. ER -