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| Volume 10, Number 1, April 2009, pp. 117-130 | |||||||
| Homing Chen and Cheng-Feng Hu | |||||||
| Key words: | |||||||
| Semi-infinite programming, interest rate model | |||||||
| Mathematices Subject Classification: 46N10, 62P05 | |||||||
|
|||||||
| Volume 10, Number 1, April 2009, pp. 117-130 | |||||||
| Homing Chen and Cheng-Feng Hu | |||||||
| Key words: | |||||||
| Semi-infinite programming, interest rate model | |||||||
| Mathematices Subject Classification: 46N10, 62P05 | |||||||
|
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| Abstract: | |||
| This work considers the resolution of the Vasicek-type interest rate model. A deterministic process is adopted to model the random behavior of interest rate variation as a deterministic perturbation. It shows that the solution of the Vasicek-type interest rate model can be obtained by solving a nonlinear semi-infinite programming problem. A relaxed cutting plane algorithm is then proposed for solving the resulting optimization problem. The numerical results illustrate that our approach essentially generates the yield functions with minimal fitting errors and small oscillation. | |||
| A relaxed cutting plane algorithm for solving the Vasicek-type interest rate model | |