Question

What is the result corresponding to that given in Problem 31.7. for the CIR model. Use maximum likelhood methods to estimate the $a, b$, and $\sigma$ parameters for the CIR model using the same data as that used for the Vasicek model in Section 31.4 (see www-2.rotman.utoronto.ca/ hull/VasicekCIR). Setting the market price of risk equal to $\kappa \sqrt{r}$ use the market data in Table 31.1 to estimate the best fit $\kappa$.

   What is the result corresponding to that given in Problem 31.7. for the CIR model. Use maximum likelhood methods to estimate the $a, b$, and $\sigma$ parameters for the CIR model using the same data as that used for the Vasicek model in Section 31.4 (see www-2.rotman.utoronto.ca/ hull/VasicekCIR). Setting the market price of risk equal to $\kappa \sqrt{r}$ use the market data in Table 31.1 to estimate the best fit $\kappa$.

Options, Futures, and Other Derivatives

John C. Hull 10th Edition

Chapter 31, Problem 17

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It is defined by the stochastic differential equation: \[ dr_t = a(b - r_t)dt + \sigma \sqrt{r_t} dW_t \] where $ r_t $ is the interest rate at time $ t $, $ a $ is the speed of mean reversion, $ b $ is the long-term mean level, $ \sigma $ is the Show more…

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What is the result corresponding to that given in Problem 31.7. for the CIR model. Use maximum likelhood methods to estimate the $a, b$, and $\sigma$ parameters for the CIR model using the same data as that used for the Vasicek model in Section 31.4 (see www-2.rotman.utoronto.ca/ hull/VasicekCIR). Setting the market price of risk equal to $\kappa \sqrt{r}$ use the market data in Table 31.1 to estimate the best fit $\kappa$.

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