Regime Switching CIR Tree
8 Pages Posted: 10 Jan 2017
Date Written: January 9, 2017
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: Suggested Citation