Existence Theorem for Mean-Reverting CEV Process with Regime Switching
- DOI
- 10.2991/meic-15.2015.357How to use a DOI?
- Keywords
- CEV process; global solution; Gronwall's inequality; Lipschitz condition; regime switching
- Abstract
Empirical studies show that the most successful continuous-time models of the short term rate in capturing the dynamics are those that allow the volatility of interest changes to be highly sensitive to the level of the rate. The mean-reverting constant elasticity of variance (CEV) process with regime switching is a stochastic differential equation that has found considerable use as a model for interest rate, volatility, and other financial quantities. Since the coefficients of CEV process do not satisfy the linear growth condition, we can not examine its properties by traditional techniques. This paper overcomes the mathematical difficulties due to the nonlinear growth of the mean-reverting CEV process with regime switching, and provides a detailed proof that there is a unique positive global solution for such SDE.
- Copyright
- © 2015, the Authors. Published by Atlantis Press.
- Open Access
- This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Cite this article
TY - CONF AU - Ruxing Xu AU - Dan Wu AU - Ronghua Yi PY - 2015/04 DA - 2015/04 TI - Existence Theorem for Mean-Reverting CEV Process with Regime Switching BT - Proceedings of the 2015 International Conference on Mechatronics, Electronic, Industrial and Control Engineering PB - Atlantis Press SP - 1560 EP - 1563 SN - 2352-5401 UR - https://doi.org/10.2991/meic-15.2015.357 DO - 10.2991/meic-15.2015.357 ID - Xu2015/04 ER -