QuantLib
A free/open-source library for quantitative finance
Reference manual - version 1.6
Public Member Functions | List of all members
CoxIngersollRoss::Dynamics Class Reference

Dynamics of the short-rate under the Cox-Ingersoll-Ross model More...

#include <ql/models/shortrate/onefactormodels/coxingersollross.hpp>

+ Inheritance diagram for CoxIngersollRoss::Dynamics:

Public Member Functions

 Dynamics (Real theta, Real k, Real sigma, Real x0)
 
virtual Real variable (Time, Rate r) const
 Compute state variable from short rate.
 
virtual Real shortRate (Time, Real y) const
 Compute short rate from state variable.
 
- Public Member Functions inherited from OneFactorModel::ShortRateDynamics
 ShortRateDynamics (const boost::shared_ptr< StochasticProcess1D > &process)
 
const boost::shared_ptr< StochasticProcess1D > & process ()
 Returns the risk-neutral dynamics of the state variable.
 

Detailed Description

Dynamics of the short-rate under the Cox-Ingersoll-Ross model

The state variable \( y_t \) will here be the square-root of the short-rate. It satisfies the following stochastic equation

\[ dy_t=\left[ (\frac{k\theta }{2}+\frac{\sigma ^2}{8})\frac{1}{y_t}- \frac{k}{2}y_t \right] d_t+ \frac{\sigma }{2}dW_{t} \]

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