Low-dimensional Cox-Ingersoll-Ross process

Abstract

The present paper investigates Cox-Ingersoll-Ross (CIR) processes of dimension less than 1, with a focus on obtaining an equation of a new type including local times for the square root of the CIR process. To derive this equation, we utilize the fact that non-negative diffusion processes can be obtained by the transformation of time and scale of a certain reflected Brownian motion. The equation mentioned above turns out to contain a term characterized by the local time of the corresponding reflected Brownian motion. Additionally, we establish a new connection between low-dimensional CIR processes and reflected Ornstein-Uhlenbeck (ROU) processes, providing a new representation of Skorokhod reflection functions.