Existence results for the Cox-Ingersoll-Ross model with variable exponent diffusion

Abstract: We propose a new stochastic model where the diffusion coefficient involves a state-dependent variable exponent function $p(\cdot)$. This new theoretically flexible framework generalizes the classical Cox-Ingersoll-Ross model. The existence, uniqueness, higher moment and martingale properties of solutions are analyzed. The validity and efficiency of the model is illustrated with numerical experiments.