Questions tagged [cox-ingersoll-ross]

The Cox-Ingersoll-Ross model is a one-parameter model describing the evolution of interest rates. A square root does not allow negative interest rates.

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Including Exogeneous variables in short rate models

I am trying to use short rate models (e.g. Vasicek, CIR or Hull-White) to forecast next one or two months yield curve. In this context, is there a way that I can include some exogenous economic or ...
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Sampling change in the driving brownian motion of a CIR process

I have volatility driven by a CIR process: $$\mathrm{d}v_t = \kappa (\bar{v}-v_t)\mathrm{d}t + \omega \sqrt{v_t}\mathrm{d}W_v\text{.}\tag{1}$$ I am working with several (complicated) approximations of ...
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Boundedness in Square Root Process

Consider the following square root diffusion price process: $$ dV_t = \kappa_V(\bar{V}-V_t)dt+\sigma_V\sqrt{V_t}dW_t $$ It is my understanding that $\kappa_V$ is the rate at which the process reverts ...
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Derivation of the distribution for a CIR process

Where is it possible to find a complete derivation of the distribution of a CIR process? There is a number of papers that claim that it is a noncentrical chi-squared distribution. However, I cannot ...
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Implicit Scheme for Cox-Ingersoll-Ross Model PDE

I am considering the PDE for the price of a bond $V(r,t)$ with maturity $T$ under the Cox-Ingersoll-Ross model, $$V_t+\frac12\sigma^2rV_{rr}+\nu(\theta-r)V_r-rV=0\quad r>0, t\in(0,1)$$ with ...
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How to initialize a UKF for term structures?

How I’can initialize a UKF (unscented kalman filter) in a CIR model for a Term structure of CDS spread? Are the sample mean and sample covariance matrix the firsts values that I’ve to set in the ...
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Affine term structure for CDS

in papres such as https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2686284 (Exploring Mispricing in the Term Structure of CDS Spreads by Robert A. Jarrow, Haitao Li, Xiaoxia Ye, and May Hu) a ...
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Vasicek Short rate simulation - analytical formula vs discretization

I've been using two approaches to simulate Vasicek short rate paths and I'm wondering if one of them is more correct than the other. The first approach is based on the analytical formula (see code ...
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How do I pricing a ZCB using CIR (Cox-Ingersoll-Ross) model

Please see the codes below My question is about input parameters (a, b and sigma)and their calculation. For the long term mean "b", do we use effective Fed Fund rates? or 3m T-bills? Also, ...
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287 views

CIR model. Is there a closed-form solution or even a good proxy of analytical solution?

Is there a closed-form (analytical) solution for the Cox-Ingersoll-Ross SDE \begin{equation} dr_t=k_r(\theta_r-r_t)dt+\sigma_r\sqrt{r_t}dW_t\tag{1} \end{equation} ? Notice that $\{r_t\}$ is our ...
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Choosing which interest rate model to go with?

I've been assigned with the task of modelling zero rate curve. I did it with two models: Vasicek and CIR. Looking at the two curves produced, I can see that one is closer to the observed curve than ...