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arXiv · 1809.00091

Generalized Ait-Sahalia-type interest rate model with Poisson jumps and convergence of the numerical approximation

Shounian Deng·Chen Fei·Weiyin Fei·Xuerong Mao
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Abstract

In this paper, we consider the generalized Ait-Sahaliz interest rate model with Poisson jumps in finance. The analytical properties including the positivity, boundedness and pathwise asymptotic estimations of the solution to the model are investigated. Moreover, we prove that the Euler-Maruyama (EM) numerical solutions will converge to the true solution in probability. Finally, under assumption that the interest rate or the asset price is governed by this model, we apply the EM solutions to compute some financial quantities.

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Shounian Deng, Chen Fei, Weiyin Fei, Xuerong Mao. 2018-09-01. Generalized Ait-Sahalia-type interest rate model with Poisson jumps and convergence of the numerical approximation. https://doi.org/10.1016/j.physa.2019.122057

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