Deriscope ## The Excel Derivatives Periscope

##### Coverage

G2_Model

*G2 Model* is a child type of Model[Short Rate] that represents a short rate that follows an affine two-factor stochastic process *r* given by the formula:

*r = φ(t) + x(t) + y(t)*

where *φ(t)* is a determinitic process, whereas *x(t)* and *y(t)* are stochastic processes given by the following SDEs:

*dx = -axdt + σdw1*

*dy = -bydt + ηdw2*

with *x(0) = y(0) = 0* and *a, b, σ, η* constants.

*w1, w2* are wiener processes correlated with *ρ*, i.e. *dw1 dw2 = ρdt*