When modeling interest rates, using strong formulations of underlying differential equations is prone to bad numerical approximations and high computational costs, due to close to non-smoothness in the probability density function of the interest rate. To circumvent these problems, a weak formulation of the Fokker–Planck equation using Gaussian radial basis functions is suggested. This approach is used in a parameter estimation process for two interest rate models: the Vasicek model and the Cox–Ingersoll–Ross model. In this thesis, such an approach is shown to yield good numerical approximations at low computational costs.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-527839 |
| Date | January 2024 |
| Creators | von Sydow, Gustaf |
| Publisher | Uppsala universitet, Sannolikhetsteori och kombinatorik |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
| Relation | U.U.D.M. project report ; 2024:4 |
Page generated in 0.0036 seconds