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Title: On the singular limit of solutions to the Cox-Ingersoll-Ross interest rate model with stochastic volatility (English)
Author: Stehlíková, Beáta
Author: Ševčovič, Daniel
Language: English
Journal: Kybernetika
ISSN: 0023-5954
Volume: 45
Issue: 4
Year: 2009
Pages: 670-680
Summary lang: English
Category: math
Summary: In this paper we are interested in term structure models for pricing zero coupon bonds under rapidly oscillating stochastic volatility. We analyze solutions to the generalized Cox–Ingersoll–Ross two factors model describing clustering of interest rate volatilities. The main goal is to derive an asymptotic expansion of the bond price with respect to a singular parameter representing the fast scale for the stochastic volatility process. We derive the second order asymptotic expansion of a solution to the two factors generalized CIR model and we show that the first two terms in the expansion are independent of the variable representing stochastic volatility. (English)
Keyword: Cox–Ingersoll–Ross two factors model
Keyword: rapidly oscillating volatility
Keyword: singular limit of solution
Keyword: asymptotic expansion
MSC: 35B25
MSC: 35C20
MSC: 35K05
MSC: 35R60
MSC: 60H10
MSC: 62P05
MSC: 91B70
MSC: 91G30
idZBL: Zbl 1196.60109
idMR: MR2588632
Date available: 2010-06-02T19:04:47Z
Last updated: 2013-09-21
Stable URL:
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