IJPAM: Volume 88, No. 2 (2013)
LIE SYMMETRIES AND APPLICATION TO ZCB PRICING
Department of Mathematics
University of Trento
Via Sommarive, 14 Trento, ITALY
Department of Computer Science
University of Verona
Via le Grazie, 14 Verona, ITALY
Abstract. Using a Lie algebraic approach we explicitly compute the transition density function for the solution of the stochastic differential equation defining the CIR process. Moreover we show how to use such a derivation to recover the well-known formula for the asscoiated ZCB fair price.
Received: July 10, 2013
AMS Subject Classification: 60H15, 35Q91
Key Words and Phrases: CIR process, stochastic differential equations, Lie symmetry groups, diffusion processes, transition densities
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DOI: 10.12732/ijpam.v88i2.7 How to cite this paper?
Source: International Journal of Pure and Applied Mathematics
ISSN printed version: 1311-8080
ISSN on-line version: 1314-3395