### 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.*