Properties of the Cox–Ingersoll–Ross Interest Rate Processes with Two-sided Reflections

Liu Chang, Shouting Chen and Ailin Zhu

Communications in Statistics - Theory and Methods, 2015, vol. 44, issue 4, 657-670

Abstract: In recent years, reflected diffusion processes have played an important role in mathematical finance because of the existence of the constraint policies to special economic regime, such as a storage system, the exchange rate target-zone dynamics, barrier options, and so on. We are to propose a class of Cox–Ingersoll–Ross interest rate processes which has double sided reflected barriers so that the central bank can constrain the interest rate to fluctuate within a pre-specified zone. In this paper, we are mainly interested in the stationary distribution and first hitting times about the reflected Cox–Ingersoll–Ross interest rate processes. Therefore, we will supply an explicit expression of the stationary distribution and some related analytic formulas of first passage times.

Date: 2015
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DOI: 10.1080/03610926.2013.813043

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