rCKLS: Simulation of the CKLS model

In alejandralopezperez/estsde: Parametric Estimation of SDE

Simulation of the CKLS model

Description

rCKLS simulates a single path of the CKLS process using the Milstein scheme. The parametric form of the CKLS model used here is given by

dX_t = (α - κ X_t)dt + σ X_t^γ dW_t.

Usage

rCKLS(n, Delta, X0, alpha, kappa, sigma, gamma)

Arguments

n	an integer indicating the sample size.
Delta	a single numeric, the time step between two consecutive observations.
X0	a single numeric, initial value of the process.
alpha	a single numeric, drift parameter.
kappa	a single numeric, rate of mean reversion.
sigma	a single numeric, volatility parameter.
gamma	a single numeric, proportional volatility exponent.

Value

A ts object, a numeric vector with the sample path of the SDE.

References

Chan, K. C., Karolyi, G. A., Longstaff, F. A., and Sanders, A. B. (1992). An empirical comparison of alternative models of the short-term interest rate. The journal of finance, 47(3):1209–1227.

Examples

x <- rCKLS(360, Delta = 1/12, X0 = 0.09, alpha = 0.08, kappa = 0.9, sigma = 1.2, gamma = 1.5)
plot(x)

alejandralopezperez/estsde documentation built on Sept. 4, 2022, 4:48 a.m.