Delay Ait-Sahalia-type interest rate model with jumps and its strong approximation

Coffie Emmanuel ()
Additional contact information
Coffie Emmanuel: Institute for Financial and Actuarial Mathematics, University of Liverpool, Liverpool, United Kingdom

Statistics & Risk Modeling, 2023, vol. 40, issue 3-4, 67-89

Abstract: In this paper, we study the analytical properties of the true solution to the generalised delay Ait-Sahalia-type interest rate model with Poisson-driven jumps. Since this model does not have a closed-form solution, we employ several new truncated Euler-Maruyama (EM) techniques to investigate the finite-time strong convergence theory of the numerical solution under the local Lipschitz condition plus the Khasminskii-type condition. We justify the strong convergence result for Monte Carlo calibration and valuation of some debt and derivative instruments.

Keywords: Stochastic interest rate model; delay volatility; Poisson jumps; truncated EM scheme; strong convergence; Monte Carlo scheme (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/strm-2022-0013 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:strimo:v:40:y:2023:i:3-4:p:67-89:n:1

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/strm/html

DOI: 10.1515/strm-2022-0013

Access Statistics for this article

Statistics & Risk Modeling is currently edited by Robert Stelzer

More articles in Statistics & Risk Modeling from De Gruyter
Bibliographic data for series maintained by Peter Golla ().