Show that the steady state density function of the short rate at time T in the CoxIngersollRoss
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Show that the steady state density function of the short rate at time T in the Cox–Ingersoll–Ross model is given by (Cox, Ingersoll and Ross, 1985)
where ω = 2α/ρ2 and ν = 2αγ/ρ2. Show that the corresponding steady state mean and variance of r(T) are γ and γρ2/2α , respectively.
Transcribed Image Text:
lim g(r(T); r(t)) = T→∞ @v Γ(ν) rv - 1e-o -wr
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In the CoxIngersollRoss CIR model the dynamics of the short rate rt are given by the stochastic differential equation drt art dt rt dW t where a is th...View the full answer
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