Black Karasinski Model & Calibration in Python
The Black-Karasinski model is a popular short-rate model used in finance to model the dynamics of interest rates.
It extends the widely used Vasicek model by allowing the volatility of interest rates to be a function of both time and the level of interest rates.
The model assumes that the short-term interest rate follows a mean-reverting process, where the speed of mean reversion and the volatility of the interest rate are both time-dependent.
I compared Black-Karasinski model and Hull White model, then I demonstrated how to implement the model in Python and how to calibrate the Black-Karasinski model.
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The Python code is uploaded into https://github.com/AIMLModeling/Black...