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It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates. Moreover, the diffusion term in the rate dynamics goes to zero...
Persistent link: https://www.econbiz.de/10012955552
It is well known that the CIR model, as introduced in 1985, is inadequate for modelling the current market environment with negative short rates, r(t). Moreover, in the CIR model, the stochastic part goes to zero with the rates, neither volatility nor long term mean change with time, or fit with...
Persistent link: https://www.econbiz.de/10012910366
The aim of this paper is to propose a new methodology that allows forecasting, through Vasicek and CIR models, of future expected interest rates (for each maturity) based on rolling windows from observed financial market data. The novelty, apart from the use of those models not for pricing but...
Persistent link: https://www.econbiz.de/10012895022
The purpose of this paper is to model interest rates from observed financial market data through a new approach to the Cox–Ingersoll–Ross (CIR) model. This model is popular among financial institutions mainly because it is a rather simple (uni-factorial) and better model than the former...
Persistent link: https://www.econbiz.de/10012861523
Persistent link: https://www.econbiz.de/10012011576
The aim of this paper is to propose a new methodology that allows forecasting, through Vasicek and CIR models, of future expected interest rates based on rolling windows from observed financial market data. The novelty, apart from the use of those models not for pricing but for forecasting the...
Persistent link: https://www.econbiz.de/10012845850
In this work we present our findings of the so‐called CIR#, which is a modified version of the Cox, Ingersoll & Ross (CIR) model, turned into a forecasting tool for any term structure. The main feature of the CIR# model is its ability to cope with negative interest rates, cluster volatility...
Persistent link: https://www.econbiz.de/10013227556