Extended Cox-Ingersoll-Ross Model

Chen and Scott (1992) transformed the CIR model into a two-factor model specifying the interest rate as a function of two uncorrelated variables, both assumed to follow a stochastic process. The article demonstrated that this modification of the model has a number of advantages and useful applications. 

In this model, the formula for deriving the price of a zero-coupon bond is (4.16). 

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