We provide necessary and sufficient conditions for a multi-factor Cox-Ingersoll-Ross (CIR) model to exhibit unspanned stochastic volatility (USV). We then construct a class of three-factor CIR models that exhibit USV. This clarifies the to date open question whether multi-factor CIR models can exhibit USV or not.
We provide necessary and sufficient conditions for a multi-factor Cox-Ingersoll-Ross (CIR) model to exhibit unspanned stochastic volatility (USV). We then construct a class of three-factor CIR models that exhibit USV. This answers in the affirmative the previously open question whether CIR models with more than two factors can exhibit USV or not.
R
clarifies the to date
answers in the affirmative the previously
R
multi-factor CIR models
CIR models with more than two factors