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What is The Cox Ingersoll Ross Model about?

The Cox-Ingersoll-Ross (CIR) model is a stochastic interest rate model that describes the evolution of interest rates through a mean-reverting process, avoiding negative rates and providing analytical solutions for bond pricing. It incorporates a stochastic differential equation and is used in conjunction with the Heston model for stochastic volatility. The model has limitations, including its inability to replicate all zero-coupon curve shapes and its single-factor nature.

Author

Martinien

Language

EN