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CIR++ calibration
Is there someone with experience on the parameters of a CIR++ model? An initial guess would be very helpful, as the optimization tends to be very time consuming.
Last edited by bianchi on June 16th, 2008, 10:00 pm, edited 1 time in total.
CIR++ calibration
what are you calibrating? i mean what is your minimization function?the ++ part of the CIR++ should calibrate automatically to the CIR modelKyriakos
CIR++ calibration
Hi! tank you very much for your answer. That was also what I thought, but the "phi" function (r(t) = x(t) + phi(t)) goes into the theoretical prices of Swaptions and also depends on the parameters. Therefore I didn't find the link between CIR and CIR++. Actually I minimize the sum of squared differences of model prices and market prices of the swaptions.
CIR++ calibration
i don't think that they can all be calibrated together, as the model is not identifiedit would be best to minimize the errors of the CIR without the shift, then add the shift and see what happensor add a smoothness criterion of a minimum shift criterion on phi if you want to have everything togetherare you using genetic algos or something for the calibration?K
CIR++ calibration
Another issue is the positive shifts. Computionally it is quite complex to ensure the shifts are positive. Can we remove this condition and make the calibration easier and fast as rates are less likely to be negative?
CIR++ calibration
Hi Rez,thanks a lot for your reply. I use the an ASA optimizer (daptive simulated annealing) whicht leads to slighly better results as the fminsearch of Matlab. Does anybody know a reference for the calibration of a cir++ model?