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Calibration of CIR Model – EXCEL Example
About the course
The course consists of an EXCEL file that demonstrates the parameter estimation of the Cox, Ingersoll and Ross (CIR) model using the method of least squares for the following representations of discrete interest rates historical series data:
- Simple discretisation
- Covariance equivalent discretisation
As part of this process the model is calibrated to the given historical interest rates dataset used.
After taking this course you will be able to:
- Use discrete interest rate data with simple or covariance equivalent discretisation representation to estimate the parameters of the continuous CIR model
- Apply the least squares method to calibrate the model to a given historical interest rates data set
Familiarity with basic mathematics and EXCEL and some knowledge of regression analysis and parameter estimation techniques.
The course is aimed at individuals responsible for asset liability management and risk management, including the simulation and stress testing of rate sensitive asset and liability portfolios within banks, insurance companies, mutual funds as well as those involved in the pricing of money market, derivatives and structured products.