Improved Predictor Corrector Scheme for Solving Cox-Inegrsoll-Ross Interest Rate Model: A Comprehensive Analysis and Applications in Financial Modeling

Authors

  • Samira Siyah Mansouri * University of Applied Science and Technology, Center of Tehran Shahdad Milk Industies, Tehran, Iran.
  • Samaneh Nyshabouri University of Applied Science and Technology, Center of Tehran Shahdad Milk Industies, Tehran, Iran.

https://doi.org/10.48314/ijorai.v1i4.80

Abstract

An Uncertain Differential Equation (UDE) is a type of differential equation driven by Liu’s canonical process. It has always been a tough problem to obtain the analytic solution of UDE. In this paper, we study a new numerical method for solving UDEs: the Improved Predictor-Corrector (IPC). Also, we translate a UDE into a system of ODEs using the concept of an α-path, which is a certain type of function. Moreover, the convergence and stability of the IPC method are detailed. This method has many applications in Financial mathematics from a numerical perspective. Furthermore, 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 understanding of interest rates, examine its application across various financial contexts, and provide deeper insight into the crucial role of interest rates in effective financial decision-making. Finally, we present various examples to show our assertions.

Keywords:

Fuzzy canonical Liu’s process, Improved predictor corrector method, Cox Ingersoll-Ross model

References

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Published

2025-12-06

Issue

Vol. 1 No. 4 (2025): International Journal of Operations Research and Artificial Intelligence (IJORAI)

Section

Articles

How to Cite

Siyah Mansouri, S. ., & Nyshabouri, S. . (2025). Improved Predictor Corrector Scheme for Solving Cox-Inegrsoll-Ross Interest Rate Model: A Comprehensive Analysis and Applications in Financial Modeling. International Journal of Operations Research and Artificial Intelligence , 1(4), 182-193. https://doi.org/10.48314/ijorai.v1i4.80

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