Polynomial Chaos Expansion Approach to Interest Rate Models

Figure 11

(a) Probability density function of Vasicek interest rate model, with parameters , , , and (blue curve) and histogram of a sampling (size = ) of the for . With the same parameters, in (b), we compare the analytical probability density function of the Vasicek model, with the one obtained using the Monte Carlo sampling of size , for , being .

(a)

(b)