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Prediction and Stability Analysis on Malaysia Bank Lending
Rate by using Cox, Ingersoll and Ross (CIR model)
Lim Bee Gaik
Supervisor: Dr. Ummu ‘Atiqah binti Mohd Roslan
Bachelor of Science in Financial Mathematics
School of Informatics and Applied Mathematics
The Base Lending Rate have been replaced by a Base Rate since 2015. It increases
transparency of customers in the Base Rate. Hence, it is interested to know how the Bank
Lending Rate would change over time. In this project, the estimated value of Bank
Lending Rate can be analysed by using Cox, Ingersoll and Ross (CIR model). The
objectives of this project are to find the fixed points for the CIR model and their stability,
to estimate the parameters in the CIR model by using Maximum Likelihood Estimation,
to predict the Bank Lending Rate for the future ten years and to analyse the stability of
the parameters in CIR model. From this research, two stable fixed points were established
for the CIR model. Besides, the future values were also predicted. All parameters in the
model do not give significant impacts on the dynamical system of CIR model.
815 | UMT UNDERGRADUATE RESEARCH DAY 2018