DEFINITION of 'CoxIngersollRoss Model  CIR '
A mathematical formula used to model interest rate movements driven by a sole source of market risk. The CoxIngersollRoss model (CIR model) believes that shortterm interest rates can be represented via a square root diffusion model with a mean reversion. The CIR model is often used in the valuation of interest rate derivatives.
INVESTOPEDIA EXPLAINS 'CoxIngersollRoss Model  CIR '
The CIR model was developed in 1985 by John C. Cox, Jonathan E. Ingersoll and Stephen A. Ross as an offshoot of the Vasicek Interest Rate model. Like the CIR model, the Vasicek model is also a onefactor modeling method. However, the Vasicek model allows for negative interest rates. This is the biggest advantage of the CIR model.
RELATED TERMS

Vasicek Interest Rate Model
A method of modeling interest rate movement that describes the ... 
Federal Open Market Committee  ...
The branch of the Federal Reserve Board that determines the direction ... 
Fixed Interest Rate
An interest rate on a liability, such as a loan or mortgage, ... 
Interest Rate
The amount charged, expressed as a percentage of principal, by ... 
Interest Rate Options
An investment tool whose payoff depends on the future level of ... 
Interest Rate Ceiling
The maximum interest rate that a financial institution can charge ...
RELATED FAQS

What is a "linear" exposure in Value at Risk (VaR) calculation?
A linear exposure in the valueatrisk, or VaR, calculation is represented by positions in stocks, bonds, commodities or ... Read Full Answer >> 
How can I create a yield curve in Excel?
You can create a yield curve in Microsoft Excel if you are given the time to maturities of bonds and their respective yields ... Read Full Answer >> 
What are the different formations of yield curves?
There are three main different formations of yield curves: normal, inverted and flat yield curves. The yield curve describes ... Read Full Answer >> 
What does a large multiplier effect signify?
The multiplier effect depends on banks' reserve requirements. In macroeconomics, if a country exhibits a large multiplier ... Read Full Answer >> 
What level of mergers and acquisitions is common in the chemical sector?
The level of mergers and acquisitions (M&As) in the chemicals sector has surged to an alltime high since the turn of ... Read Full Answer >> 
What is the criteria for a simple random sample?
Simple random sampling is the most basic form of sampling and can be a component of more precise, more complex sampling methods. ... Read Full Answer >>
Related Articles

Investing Basics
What is a Nominal Value?
The nominal value of a security, such as a stock or bond, remains fixed for the duration of its life. 
Economics
Explaining the Human Development Index
The Human Development Index (HDI) is a metric developed by the United Nations to take the emphasis off economic growth and focus on human wellbeing. 
Fundamental Analysis
Calculating Future Value
Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. 
Economics
What is Deadweight Loss?
Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources. 
Investing
The Strong Dollar’s (Real) Toll On Tech Stocks
A large portion of U.S. technology companies’ sales occur overseas, given the strong international business and consumer demand from many U.S. tech firms. 
Investing
What A Rate Hike May Mean For Stocks
By the end of the year, investors will likely be contending with the first Federal Reserve (Fed) rate hike in nearly a decade. 
Fundamental Analysis
How to Calculate a Coverage Ratio
In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders. 
Economics
How to Do a CostBenefit Analysis
The benefits of a given situation or businessrelated action are summed and then the costs associated with taking that action are subtracted. 
Professionals
Why You Should Avoid Fixating on Bond Duration
Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration. 
Forex Strategies
What Makes the EUR/USD A Risky Trade Now?
What are the current risks of trading the EUR/USD pair? The Fed may raise interest rates this summer and the ECB has begun a quanitative easing program.