Long-term behavior of stochastic interest rate models with Markov switching

Zhenzhong Zhang, Jinying Tong and Liangjian Hu

Insurance: Mathematics and Economics, 2016, vol. 70, issue C, 320-326

Abstract: In this paper, we consider the long time behavior of Cox–Ingersoll–Ross (CIR) interest rate model with Markov switching. Using the ergodic theory of switching diffusions, we show that CIR model with Markov switching has a unique stationary distribution. Furthermore, we prove that the sequence X¯t:=1t∫0tXsds converges almost surely. As a by-product, we find that the marginal stationary distribution for CIR model with Markov switching can be determined uniquely by its moments.

Keywords: Cox–Ingersoll–Ross (CIR) model; Markov chain; Stationary distribution; Feller property; Hölder continuous (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:70:y:2016:i:c:p:320-326

DOI: 10.1016/j.insmatheco.2016.06.017

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