An Improved CIR Tree
18 Pages Posted: 10 Jan 2017
Date Written: January 9, 2017
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: Suggested Citation