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The following features distinguish the short-rate models in APeX.
Popular 1-factor short-rate models: All Log-Normal and Normal mean-reverting short-rate models: Black-Derman-Toy (BDT), Black-Karasinski (BK), Hull-White (HW), Ho-Lee (HL) models are supported.
Volatility and mean-reversion curves: For each of the above models, the volatility (sigma) and mean-reversion (alpha) curves can be a flat number, driven from the calibrated caplet curve, a result of calibration, or provided by the user.
Full forward curve per node: The full forward curve for each node is computed and cached once, obviating the need for repeated backward induction. This greatly speeds up book pricing and hedging.
Variable-length discretization: The lattice-dates can be selected by the user, making the lattice per-deal or per-book. One can switch from a fine (daily) to coarser discretization.
Calibration: Analytic or tree-based calibration of the vol and mean-reversion curves. These curves can be defined to be flat, parametric: e.g., weighted sum of orthogonal polynomials, or piecewise defined. One can also suppress the mean-reversion calibration by fixing it at a specific level.
Flexible tree class: The underlying classes are flexible C++ tree classes, allowing the user to build multi-nomial recombining or bushy trees for generic financial quantities (short rate, forward curve, equities). Arrow-Debreu prices and transition probabilities between arbitrary tree-dates are automatically computed and can be accessed.
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