"Yes, our tree has an interesting shape. The center branches reflect the shape of the zero curve. When extreme parts of the tree are reached the branching pattern changes to accommodate the mean reversion."

Extreme,

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"Yes, our tree has an interesting shape. The center branches reflect the shape of the zero curve. When extreme parts of the tree are reached the branching pattern changes to accommodate the mean reversion."

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Explore more quotes by John Hull

"Our tree is actually a tree of the short-term interest rate. The average direction in which the short-term interest rate moves depends on the level of the rate. When the rate is very high, that direction is downward; when the rate is very low, it is upward."

Direction

"The HoLee model was the first term structure model. I remember reading their paper soon after it was published and as it was fairly different from many of the other papers that I had read, I had to read it quite a few times. I realized that it was a really important paper."

First

"Briefly speaking, our conclusion is that stochastic volatility does not make a huge difference as far as the pricing is concerned if you get the average volatility right. It makes a big difference as far as hedging is concerned."

Difference

"If each of your time steps is one week long, you are not modeling the stock price terribly well over a one-week time period, because you are saying that there are only two possible outcomes."

Time

"When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward."

Direction

"The problem with interest rates are that you are not modeling a single number, you are modeling a whole term structure, so it is a sort of different type of problem."

Interest

"Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model."

Trying

"I guess any simple idea that is really good will catch on quickly."

Idea

"I think VAR is a very healthy development within the industry."

Development

"There are challenges in terms of the measurement of VAR for what are known as nonlinear derivatives, where things like gamma and vega are important dimensions of the risk."

Risk