Transition probabilities in a problem of stochastic process switching

Extant solutions for state-contingent process switching use first-passage time densities or differential equations. We alternatively employ transition probabilities. These conditional likelihood functions also have obvious appeal for econometric analyses as well as derivative pricing and decision making under absorption and extinction.

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Year of publication:	2012
Authors:	Veestraeten, Dirk
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 114.2012, 2, p. 201-204
Publisher:	Elsevier
Subject:	Absorption \| Derivative pricing \| Maximum likelihood estimation \| Stochastic process switching \| Transition probability

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Type of publication:	Article
Classification:	C24 - Truncated and Censored Models ; F31 - Foreign Exchange ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

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