A Beautiful Breakdown of CIR Intensity: Exact Simulation and Financial Application
报告人： Hongbiao Zhao, Xiamen University
时间：2016-11-24 14:00 ~ 15:30
地点：Room 217, Guanghua Building 2
Abstract:
We introduce a family of generalised self-exciting point processes with CIR-type intensities, and develop an associated scheme for their exact simulation. The underlying models are extensions of the classical Hawkes process which already has wide applications in modelling the arrival of events with clustering or contagion effect in finance, economics and many other fields. Interestingly, we find that the CIR intensity together with its point process can be sequentially broken down into several simple random variables, which immediately leads to a very efficient simulation algorithm. Our algorithm is pretty accurate, efficient and flexible. It is easy to be extended to further incorporate externally-excited jumps, or, to a multi-dimensional version. Some numerical examples (including some unconventional cases that are often hard to be generated by other algorithms in the existing literature) as well as an example of application to the portfolio credit risk are also provided.
About the Speaker:
Dr. Hongbiao Zhao is currently an assistant professor of finance, jointly at the Department of Finance of School of Economics and the Wang Yanan Institute for Studies in Economics (WISE) at Xiamen University. He obtained PhD in 2012 from in London School of Economics (LSE). Previously, he also briefly worked as a quantitative investment analyst in the Investment Strategy Group of Paternoster (now a subsidiary of Goldman Sachs) in London from 2007 to 2008. His research areas and interests are financial engineering and actuarial science.
