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.
You are welcome to provide your comments and subscribe to my UA-cam channel.
The Python code is uploaded into github.com/AIM...

[@linxu7111]

This is really great hands-on introduction to the BK model! Maybe worth mentioning there’s a 2-factor extension for the model which is also widely used on the street. Anyway, thanks to UA-cam recommending this video to me and I found your channel a real gem! Please keep updating!

[@statisticsandriskmodeling5477]

Glad my channel is helpful. Thank you for your suggestion and encouragement.

[@andra-cristinatugui5379]

Great and useful video! Thank you 🙏

[@statisticsandriskmodeling5477]

Thank you for your encouragement

[@Vipperson970]

Thank you for the great video!
Could you also explain when to build trinomial trees for Black-Karasinski model? Or maybe you can just recommend the literature where it can be learned

[@statisticsandriskmodeling5477]

I published a video about building trinomial trees for Black-Karasinski model in my UA-cam channel. Hope that video is helpful.

[@Vipperson970]

❤️

[@aarondelarosa3146]

Excellent. Can you share Data Base?

[@christophetravelletti256]

Great video. Thanks ! I remembered you did another good one on the Hull White calibration but did not provide the code. Would be great if you could. Thanks again

[@statisticsandriskmodeling5477]

Thank you for your encouragement. If you are talking about this video ua-cam.com/video/fCwa12lFb1M/v-deo.html , I had a link to the code in the description.

[@christophetravelletti256]

I was talking about that one ua-cam.com/video/mCr0HoGUoXc/v-deo.html
Thanks again!

[@pratyushdayal852]

code is not there

[@statisticsandriskmodeling5477]

@@pratyushdayal852 Sorry. I forgot uploading those files. Now they are in my GitHub.

[@aarondelarosa3146]

FileNotFoundError: [Errno 2] No such file or directory: 'C:\\Documents\\MyOwnModel\\BlackKarasinski/marketrate.txt'

[@statisticsandriskmodeling5477]

I uploaded the file into my GitHub. You may get it from there.