Closed-Form Expansions for Transition Densities of Convenience Yield Processes



In this paper, we derive closed-form expansions for transition densities of convenience yield processes modeled by using extended Cox-Ingersoll-Ross (ECIR) processes. The closed-form expansions can be used for all cases of model having appropriate drift and diffusion coefficients. In terms of the efficiency, the closed-form expansions are close to the exact transition densities when the number of terms in the expansions is large and the time step size is small.


Closed-form expansions, transition densities, convenience yield, ECIR processes

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Last updated: 13 February 2019