Why Are Hull-White Prices for Call Options Different from the Prices

question 16

Essay

Why are Hull-White prices for call options different from the prices ob- tained in the Vasicek model?

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Definitions:

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear over time.

Double-Declining-Balance Method

A form of accelerated depreciation method where an asset's book value is reduced at double the rate of its straight-line depreciation.

Units-Of-Production Method

A depreciation method that allocates an asset's cost based on its usage, output, or units of production rather than the passage of time.

Units-Of-Output Method

A depreciation method where the expense is calculated based on the units produced by the asset.