An Improved CIR Tree

18 Pages Posted: 10 Jan 2017

Date Written: January 9, 2017

Abstract

The Cox-Ingersoll-Ross (CIR)-process is a well-known model for interest rate or default rate modeling. Here we combine two existing tree approximations, each of them having some disadvantages, in order to obtain an improved tree implementation ensuring convergence for all CIR processes.

Keywords: CIR-short rate process, Tree Approximations, Convergence

JEL Classification: G13

Suggested Citation

Overbeck, Ludger and Weckend, Johannes, An Improved CIR Tree (January 9, 2017). Available at SSRN: https://ssrn.com/abstract=2895942 or http://dx.doi.org/10.2139/ssrn.2895942

Ludger Overbeck (Contact Author)

University of Giessen ( email )

Institut of Mathematics
Giessen, 35394
Germany

Johannes Weckend

Independent ( email )

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