Normally Distributed Short Rate Models Are Dead - Long Live Normally Distributed Short Rate Models

Take the Hull-White model scheme that is normally distributed..

Its disadvantage: interest rates can become negative.
Its advantage: interest rates can become negative.

Markets shifted to new regimes where interest rates not only become theoretically negative because of the random walk, but in reality.

Quantitative finance is, in our understanding, the art of modeling financial processes and then to somehow calculate fair values of financial instruments. There are intrinsically severe traps that need to be avoided.

So, if you at the moment price simple interest rate instruments with, say, Black 76 based valuation systems (or any other lognormally distributed models), you might run into problems.

Usually, one might not apply comprehensive model validation tasks for simple instruments, but we always propagate cross-model simulation. And we have carefully implemented General Hull-White models, one factor with adaptive integration and two factor with finite elements tuned by streamline diffusion techniques.
Interest rate instruments in UnRisk can be valued under Black 76, LIBOR market, Black Karasinski and Hull-White models. There are not so few people who have thought, normally distributed Short Rate Models are outdated.

Luckily, our model-mix has created new UnRisk uses ..... a stretch from the most sophisticated to the vanilla deal types.