Mathematics Colloquium

Anke Wiese

(Heriot-Watt University)

"Simulation of the Cox-Ingersoll-Ross process and the Heston model"

Date: Mon, April 13, 2015
Time: 17:15
Place: Research II Lecture Hall

Abstract: The Cox-Ingersoll-Ross (CIR) process is frequently used as a model in financial applications, for example it is well known as a model for the short rate of interest (Cox, Ingersoll and Ross 1985) and the variance process in the Heston stochastic volatility model (Heston 1993). While many properties of the CIR process are well-understood, no known analytic solution in terms of the driving Wiener process is known. Hence the efficient simulation of the CIR process, while retaining key properties in the approximation, is an important aspect for applications. In this talk, we will present two new efficient methods for sampling the CIR process, and we will illustrate our methods in the Heston model.

The colloquium is preceded by tea from 16:45 in the Resnikoff Mathematics Common Room, Research I, 127.