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Embedding the Vasicek model into the Cox-Ingersoll-Ross model

Sinkala, W and Leach, PGL and O'Hara, JG (2011) 'Embedding the Vasicek model into the Cox-Ingersoll-Ross model.' Mathematical Methods in the Applied Sciences, 34 (2). pp. 152-159. ISSN 0170-4214

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The Cox-Ingersoll-Ross (CIR) model and the Vasicek model are two well-known single factor models of the interest spot rate. In this paper, we construct a mapping by means of which the price of a zero-coupon bond in the CIR model may be obtained from a corresponding price in the Vasicek model. We use symmetry analysis to construct this mapping and verify it by transforming three arbitrary solutions of the pricing equation in the Vasicek model into solutions of the corresponding equation in the CIR model. © 2010 John Wiley & Sons, Ltd.

Item Type: Article
Uncontrolled Keywords: lie symmetry analysis; Vasicek model; Cox-Ingersoll-Ross model; zero-coupon bond; interest rate model; partial differential equation; financial mathematics
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Divisions: Faculty of Science and Health
Faculty of Science and Health > Mathematical Sciences, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 01 Feb 2013 15:58
Last Modified: 15 Jan 2022 00:33

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