Cox-Ingersoll-Ross Tree Setup
The Cox-Ingersoll-Ross (CIR) model assumes that the short rate follows a mean-reverting stochastic process. This characteristic reflects the idea that interest rates will tend to move towards a long-term average level over time. Setup a CIR interest-rate tree model using the following functions:
Functions
cirtimespec | Specify time structure for Cox-Ingersoll-Ross tree |
cirtree | Build a Cox-Ingersoll-Ross interest-rate tree |
cirvolspec | Specify Cox-Ingersoll-Ross interest-rate volatility process |
Topics
- Understanding Interest-Rate Tree Models
Financial Instruments Toolbox™ supports the Black-Derman-Toy (BDT), Black-Karasinski (BK), Heath-Jarrow-Morton (HJM), and Hull-White (HW) interest-rate models.
- Use treeviewer to Examine HWTree and PriceTree When Pricing European Callable Bond
This example demonstrates how to use
treeviewerto examine tree information for a Hull-White tree when you price a European callable bond. - Overview of Interest-Rate Tree Models
Financial Instruments Toolbox computes prices and sensitivities of interest-rate contingent claims based on several methods of modeling changes in interest rates over time.
