PurposeThe purpose of this study is to determine distributional properties of the accumulated rate of interest when the instantaneous rate of interest evolves in terms of the Cox et al. (1985) square root process.Design/methodology/approachThe law of iterated (or double) expectations is used to...

We develop the Cox, Ingersoll and Ross (1985b) “technological uncertainty variable” in terms of a skewed Student “t” probability density with mean reverting sample paths and time varying volatility so that it can accommodate negative real interest rates. The Fokker-Planck equation is...