2262

Society for Industrial and Applied Mathematics

2006

66

2

721-735

extended CIR model , calibration , inverse problem , solution uniqueness and existence , numerical solutions

In this paper we shall prove that the calibration problem for the extended CIR model in [J. Hull and A. White, Rev. Financial Studies, 3 (1990), pp. 573–592] has a unique solution. The constructive proof leads to a numerical algorithm for computing the approximations of the time- dependent parameters and the zero-coupon bond prices. The results are also extended to multifactor CIR (Cox–Ingersoll–Ross) models. Numerical results are presented to examine the accuracy of our algorithm and to compare the extended CIR model with the Vasicek models.

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