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by Tim111
May 4th, 2008, 4:13 pm
Forum: Student Forum
Topic: CIR model and the Feller condition
Replies: 3
Views: 58383

CIR model and the Feller condition

<t>Hello all,I have been working with the CIR interest rate model where,dr(t) = alpha(mew-r(t))dt + sigma.sqrt(r(t))dWtand using the bond pricing PDE,(dF/dt)+0.5.r.(sigma^2)(d2F/dr2) + (alpha(mew-r)-lambda.r)(dF/dr)-rF = 0I have been trying to derive the Feller condition, (2.alpha.mew)/sigma^2 > 1Wh...