In this paper we replace the Gaussian errors in the standard Gaussian, linear state space model with stochastic volatility processes. This is called a GSSF-SV model. We show that conventional MCMC algorithms for this type of model are ineffective, but that this problem can be removed by...

Estimating the volatility from the underlying asset price history for the discrete observations case is a challenging inference problem. Yet it has attracted much research interest due to the key role of volatility in many areas of finance. In this paper we consider the Heston stochastic...