Generalized Ait-Sahalia-type interest rate model with Poisson jumps and convergence of the numerical approximation

Shounian Deng, Chen Fei, Weiyin Fei and Xuerong Mao

Physica A: Statistical Mechanics and its Applications, 2019, vol. 533, issue C

Abstract: In this paper, we consider a generalized Ait-Sahalia interest rate model with Poisson jumps in finance. The analytical properties including positivity, boundedness and pathwise asymptotic estimations of the solution to this model are investigated. Moreover, we prove that the Euler–Maruyama (EM) numerical solution converges to the true solution of the model in probability. Finally, we apply the EM solution to compute some financial quantities. A numerical example is provided to demonstrate the effectiveness of our results.

Keywords: Stochastic interest rate model; Poisson jumps; EM method; Convergence in probability (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:533:y:2019:i:c:s0378437119312014

DOI: 10.1016/j.physa.2019.122057

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