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Black-Karasinski Tree Setup

Propagate Black-Karasinski interest-rate tree

The Black-Karasinski (Bk) model assumes that the short rate follows a log-normal process. This means that the logarithm of the short rate is normally distributed, which ensures that interest rates remain positive. Setup a BK interest-rate tree model using the following functions:

Functions

bktimespecSpecify time structure for Black-Karasinski tree
bktreeBuild Black-Karasinski interest-rate tree
bkvolspecSpecify Black-Karasinski interest-rate volatility process

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