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Polynomial Chaos Expansion Approach to Interest Rate Models
Joint Authors
Di Persio, Luca
Pellegrini, Gregorio
Bonollo, Michele
Source
Journal of Probability and Statistics
Issue
Vol. 2015, Issue 2015 (31 Dec. 2015), pp.1-24, 24 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2015-12-03
Country of Publication
Egypt
No. of Pages
24
Main Subjects
Abstract EN
The Polynomial Chaos Expansion (PCE) technique allows us to recover a finite second-order random variable exploiting suitable linear combinations of orthogonal polynomials which are functions of a given stochastic quantity ξ, hence acting as a kind of random basis.
The PCE methodology has been developed as a mathematically rigorous Uncertainty Quantification (UQ) method which aims at providing reliable numerical estimates for some uncertain physical quantities defining the dynamic of certain engineering models and their related simulations.
In the present paper, we use the PCE approach in order to analyze some equity and interest rate models.
In particular, we take into consideration those models which are based on, for example, the Geometric Brownian Motion, the Vasicek model, and the CIR model.
We present theoretical as well as related concrete numerical approximation results considering, without loss of generality, the one-dimensional case.
We also provide both an efficiency study and an accuracy study of our approach by comparing its outputs with the ones obtained adopting the Monte Carlo approach, both in its standard and its enhanced version.
American Psychological Association (APA)
Di Persio, Luca& Pellegrini, Gregorio& Bonollo, Michele. 2015. Polynomial Chaos Expansion Approach to Interest Rate Models. Journal of Probability and Statistics،Vol. 2015, no. 2015, pp.1-24.
https://search.emarefa.net/detail/BIM-1069989
Modern Language Association (MLA)
Di Persio, Luca…[et al.]. Polynomial Chaos Expansion Approach to Interest Rate Models. Journal of Probability and Statistics No. 2015 (2015), pp.1-24.
https://search.emarefa.net/detail/BIM-1069989
American Medical Association (AMA)
Di Persio, Luca& Pellegrini, Gregorio& Bonollo, Michele. Polynomial Chaos Expansion Approach to Interest Rate Models. Journal of Probability and Statistics. 2015. Vol. 2015, no. 2015, pp.1-24.
https://search.emarefa.net/detail/BIM-1069989
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1069989