Unspanned Stochastic Volatility in Multi-Factor CIR Models
Event details
| Date | 01.07.2015 |
| Hour | 14:00 › 15:00 |
| Speaker | Francesco STATTI (Master Student, Mathematics Department, ETHZ) |
| Location | |
| Category | Conferences - Seminars |
Empirical evidence suggests that fixed income markets exhibit unspanned stochastic volatility (USV), i.e. that one cannot fully hedge volatility risk solely using a portfolio of bonds. One of the basic models for the term structure of interest rates is the multi-factor Cox-Ingersoll-Ross (CIR) model; however, it is not known whether this model admits USV. This master thesis attempts to answer the question: Is it possible to construct a multi-factor CIR model which admits USV? So far some partial results have been obtained, which will be discussed in this talk.
Practical information
- Informed public
- Free