  While the original Ait-Sahalia interest rate model has been found
considerable use as a model for describing time series evolution of interest
rates, it may not possess adequate specifications to explain responses of
interest rates to empirical phenomena such as volatility 'skews' and 'smiles',
jump behaviour, market regulatory lapses, economic crisis, financial clashes,
political instability, among others collectively. The aim of this paper is to
propose a modified version of this model by incorporating additional features
to collectively describe these empirical phenomena adequately. Moreover, due to
lack of a closed-form solution to the proposed model, we employ several new
truncated EM techniques to examine this model and justify the scheme within
Monte Carlo framework to compute expected payoffs of some financial quantities
such as a bond and a barrier option.
