Year: 2008
Type: preprint
Abstract: In affine term structure models the short rate is modelled as an affine transformation of a multi-dimensional square root process. Sufficient conditions to avoid negative volatility factors are the multivariate Feller conditions. We will prove their necessity for a 2-dimensional square root SDE with one volatility factor by presenting a methodology based on measure transformations and solving linear systems of ordinary differential equations.
Source: arXiv (Cornell University)
Authors: Spreij, Peter, Veerman, Enno
Institution: University of Amsterdam
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2143036867