Financial Engineering Course: Lecture 4 part 2/2

Hello everyone,
Today, in the final part of Lecture no. 4, the dynamics of a yield curve under a short rate model of Hull-White will be discussed. In particular, we will focus on the comparison of a 1-Factor vs 2-Factor Hull-White Model. Finally, I cover the scenarios in which the 2-Factor model must be used, especially in the context of a yield curve evolution in time. We wrap up this lecture with a homework assignment.
In today’s lecture, we will cover the following subjects:
 – Limitations of the 1-Factor Model and Yield Curve Dynamics
– Gaussian 2-Factor Model
– Summary of the Lecture + Homework
Lecture slides and additional materials you can find in the link in the video’s description.

Lecture 1- Introduction and Overview of the Course
Lecture 2- Understanding of Filtrations and Measures
Lecture 3- The HJM Framework
*** Lecture 4- Yield Curve Dynamics under Short Rate
Lecture 5- Interest Rate Products
Lecture 6- Construction of Yield Curve and Multi-Curves
Lecture 7- Pricing of Swaptions and Negative Interest Rates
Lecture 8- Mortgages and Prepayments
Lecture 9- Hybrid Models and Stochastic Interest Rates
Lecture 10- Foreign Exchange (FX) and Inflation
Lecture 11- Market Models, Convexity Adjustments and Beyond
Lecture 12- Valuation Adjustments- xVA (CVA, BCVA and FVA)
Lecture 13- Historical VaR, SVaR and Expected Shortfall
Lecture 14- Summary of the Course