Negative volatility for a 2-dimensional square root SDE
Probability
2008-11-25 v3
Abstract
In affine term structure models the short rate is modelled as an affine transformation of a multi-dimensional square root process. Sufficient conditions to avoid negative volatility factors are the multivariate Feller conditions. We will prove their necessity for a 2-dimensional square root SDE with one volatility factor by presenting a methodology based on measure transformations and solving linear systems of ordinary differential equations.
Cite
@article{arxiv.0807.1224,
title = {Negative volatility for a 2-dimensional square root SDE},
author = {Peter Spreij and Enno Veerman},
journal= {arXiv preprint arXiv:0807.1224},
year = {2008}
}
Comments
15 pages, 0 figures