Hull, John and Alan White, "Numerical procedures for implementing term structure models I: Single-Factor Models", Journal of Derivatives, Vol. 2, No. 1, (Fall 1994), pp. 7-16.

Abstract: Pricing interest rate-contingent claims requires a model for the evolution of the term structure of rates. There are many recent contenders, differing in their ability to match a given initial yield curve of market rates and in their ease of computation. In this article, Hull and White develop a one-factor framework that is general enough to incorporate a number of the known models as special cases. They then show step-by-step how to solve the model numerically with a trinomial lattice. The algorithm converges rapidly to the theoretical option value and produces accurate Greek letter risk exposures.

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