Exponential ergodicity of an affine two-factor model based on the α-root process
2017 ◽
Vol 49
(4)
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pp. 1144-1169
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Abstract We study an affine two-factor model introduced by Barczy et al. (2014). One component of this two-dimensional model is the so-called α-root process, which generalizes the well-known Cox–Ingersoll–Ross process. In the α = 2 case, this two-factor model was used by Chen and Joslin (2012) to price defaultable bonds with stochastic recovery rates. In this paper we prove exponential ergodicity of this two-factor model when α ∈ (1, 2). As a possible application, our result can be used to study the parameter estimation problem of the model.
1986 ◽
Vol 5
(4)
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pp. 38-55
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1997 ◽
Vol 16
(2)
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pp. 141-163
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2007 ◽
Vol 39
(2)
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pp. 109-127
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2013 ◽
Vol 69
(2)
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pp. I_700-I_705
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2002 ◽
Vol 61
(1)
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pp. 34-44
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