Polynomial Chaos Expansion Approach to Interest Rate Models

<table class="table-group" id="tab5"><tr><td><table class="table"><tr><td class="thead-hr" colspan="6"><hr/></td></tr><tr class="thead"><td align="left">  Parameters </td><td align="center"><span style="width: 7.69399ptpx;"><svg height="6.20645pt" id="M326" style="vertical-align:-0.2063999pt" version="1.1" viewbox="-0.0498162 -6.00005 7.69399 6.20645" width="7.69399pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M558 106L533 129C501 84 476 67 464 67C446 67 435 116 414 239C457 297 508 367 550 440L539 451L484 438C458 390 429 338 404 300H402C375 407 351 451 285 451C168 451 24 312 24 153C24 56 66 -12 132 -12C206 -12 284 64 345 156H347C367 24 386 -12 422 -12C457 -12 503 7 558 106ZM338 206C272 99 215 56 173 56C140 56 116 96 116 170C116 303 194 405 255 405C304 405 324 299 338 206Z" id="g50-223"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="582" vert-adv-y="582"></glyph.data></g></svg></span></td><td align="center"><span style="width: 7.75923ptpx;"><svg height="12.6917pt" id="M327" style="vertical-align:-3.40337pt" version="1.1" viewbox="-0.0498162 -9.28833 7.75923 12.6917" width="7.75923pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M563 583C563 664 501 710 433 710C381 710 334 692 285 648C212 582 178 506 149 350L74 -56C49 -190 36 -222 24 -226L30 -257C52 -256 95 -247 121 -229C131 -222 134 -206 165 -21L219 303C254 510 296 665 397 665C447 665 481 626 481 572C481 512 446 457 390 420C367 405 351 400 323 397L302 349C398 338 466 285 466 197C466 117 419 45 306 45C268 45 224 59 198 74L186 50C197 20 228 -14 274 -14C318 -14 359 3 401 26C478 68 554 144 554 225C554 322 493 367 412 396C490 446 563 500 563 583Z" id="g50-224"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="587" vert-adv-y="587"></glyph.data></g></svg></span></td><td align="center"><span style="width: 7.61571ptpx;"><svg height="6.41523pt" id="M328" style="vertical-align:-0.2063999pt" version="1.1" viewbox="-0.0498162 -6.20883 7.61571 6.41523" width="7.61571pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M558 454L532 470C512 451 497 442 465 442C421 442 376 450 318 450C146 450 24 313 24 164C24 46 91 -12 183 -12C317 -12 439 105 439 247C439 306 428 346 382 385L383 389C414 384 450 379 485 379C517 379 539 412 558 454ZM357 273C357 191 313 28 205 28C149 28 111 79 111 160C111 266 175 396 280 396C298 396 328 386 341 357C353 331 357 315 357 273Z" id="g50-240"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="576" vert-adv-y="576"></glyph.data></g></svg></span></td><td align="center"><span style="width: 13.2798ptpx;"><svg height="11.7574pt" id="M329" style="vertical-align:-3.16066pt" version="1.1" viewbox="-0.0498162 -8.59674 13.2798 11.7574" width="13.2798pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M636 22C611 29 589 38 560 74C536 104 518 134 495 173L430 300C518 328 592 392 592 492C592 555 563 594 528 618C491 643 435 650 377 650H140L131 618C222 610 223 601 208 518L137 136C121 43 116 40 27 32L18 0H295L300 32C212 40 206 42 223 138L248 279H296C334 279 350 272 369 230C393 174 413 140 441 94C482 24 523 1 626 -8L636 22ZM497 480C497 422 468 374 417 343C387 324 353 315 304 315H255L298 556C303 583 309 598 319 603C331 610 348 613 367 613C448 613 497 573 497 480Z" id="g50-83"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="654" vert-adv-y="654"></glyph.data></g><g transform="matrix(.0091,0,0,-0.0091,8.203,3.001)"><path d="M245 635C92 635 37 457 37 312C37 149 91 -12 244 -12C395 -12 449 166 449 312C449 469 395 635 245 635ZM243 598C332 598 358 454 358 312C358 173 334 26 245 26C158 26 128 174 128 313S152 598 243 598Z" id="g50-49"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g></svg></span></td><td align="center"><span style="width: 8.51608ptpx;"><svg height="8.85534pt" id="M330" style="vertical-align:-0.04981041pt" version="1.1" viewbox="-0.0498162 -8.80553 8.51608 8.85534" width="8.51608pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M655 676H628C608 656 600 650 571 650H156C118 650 114 651 102 676H77C63 615 45 548 24 485L60 486C81 531 97 562 114 580C134 603 148 611 252 611H308L217 127C201 41 196 38 105 32L98 0H384L393 32C300 38 288 41 304 127L393 611H466C553 611 571 604 582 580C592 559 597 530 595 485L630 489C636 548 645 624 655 676Z" id="g50-85"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="673" vert-adv-y="673"></glyph.data></g></svg></span></td></tr><tr><td class="thead-hr" colspan="6"><hr/></td></tr><tr><td align="left">  Values </td><td align="center">  0.1 </td><td align="center"> 0.2</td><td align="center">  15% </td><td align="center">  110 </td><td align="center"> 1 </td></tr><tr class="table-tr"><td colspan="6"><hr class="tbody-hr"/></td></tr></table></td></tr></table>

Parameters and initial value for the Vasicek interest rate model.

Journal of Probability and Statistics

tab5

Table 5

Table 5: Polynomial Chaos Expansion Approach to Interest Rate Models 