Polynomial Chaos Expansion Approach to Interest Rate Models

Figure 17

(a) Probability density function of CIR interest rate model, whose parameters are , , , and (blue curve) and histogram of a sampling (size = ) of the for . (b) compares the analytical probability density function of CIR interest rate model, for the same parameters, with a standard Monte Carlo sampling of size of at time .

(a)

(b)