Research Article
Exploring the Cox Ingersoll Ross (CIR) Interest Rate Model: A Comprehensive Analysis and Applications in Financial Modeling
@INPROCEEDINGS{10.4108/eai.19-9-2023.2340453, author={Nerli Khairani and Elfitra Elfitra and Sara Hikmayanti and Tiur Malasari Siregar}, title={Exploring the Cox Ingersoll Ross (CIR) Interest Rate Model: A Comprehensive Analysis and Applications in Financial Modeling}, proceedings={Proceedings of the 8th Annual International Seminar on Transformative Education and Educational Leadership, AISTEEL 2023, 19 September 2023, Medan, North Sumatera Province, Indonesia}, publisher={EAI}, proceedings_a={AISTEEL}, year={2023}, month={12}, keywords={cir model comprehensive modeling finance}, doi={10.4108/eai.19-9-2023.2340453} }- Nerli Khairani
Elfitra Elfitra
Sara Hikmayanti
Tiur Malasari Siregar
Year: 2023
Exploring the Cox Ingersoll Ross (CIR) Interest Rate Model: A Comprehensive Analysis and Applications in Financial Modeling
AISTEEL
EAI
DOI: 10.4108/eai.19-9-2023.2340453
Abstract
This research comprehensively analyzes the Cox Ingersoll Ross (CIR) interest rate model and explores its application in financial modeling. The CIR model is widely used in finance to model interest rates and has proven to be a valuable tool for understanding and predicting interest rate dynamics. Through comprehensive analysis and exploration of the interest rate model, the CIR aims to deepen the concept of interest rates, analyze the application of the CIR model in various financial contexts, and provide deeper insight into the crucial role of interest rates in effective financial decision-making. This research method covers all the essential steps needed to explore the Cox Ingersoll Ross (CIR) Interest Rate Model in-depth, adopting a qualitative descriptive approach using deductive reasoning. The author will examine financial modeling. Several significant findings have been revealed with the results of research on implementing the CIR model to approximate interest rates. First, it was found that the interest rate approximation based on the CIR model shows quite good performance, mainly when applied to data whose fluctuations are not too large. Second, it is essential to note that in the context of actuarial interest rates used in research related to pension funding, stochastic interest rates, as described in the CIR model, better reflect the actual situation
