Regime Switching CIR Tree

8 Pages Posted: 10 Jan 2017

Date Written: January 9, 2017

Abstract

In time series of financial data one often observes significant sudden changes as in the credit crisis in 2008. One way to model those changes is regime switching. Here we show how to handle regime switching in a tree associated with a Cox-Ingersoll-Ross short rate process.

Keywords: Regime Switching, Cox-Ingersoll-Ross, Tree Approximation

JEL Classification: G13

Suggested Citation

Overbeck, Ludger and Weckend, Johannes, Regime Switching CIR Tree (January 9, 2017). Available at SSRN: https://ssrn.com/abstract=2895939 or http://dx.doi.org/10.2139/ssrn.2895939

Ludger Overbeck (Contact Author)

University of Giessen ( email )

Institut of Mathematics
Giessen, 35394
Germany

Johannes Weckend

Independent ( email )

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