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Maximum likelihood estimation for generalized autoregressive score models

Blasques, Francisco; Koopman, Siem Jan; Lucas, André - 2014

normality under correct specification and under mis-specification. We provide various illustrations of how the theory can be …

Persistent link: https://www.econbiz.de/10010250505

Robust estimation of nonstationary, fractionally integrated, autoregressive, stochastic volatility

Jensen, Mark J. - 2015

Empirical volatility studies have discovered nonstationary, long-memory dynamics in the volatility of the stock market and foreign exchange rates. This highly persistent, infinite variance - but still mean reverting - behavior is commonly found with nonparametric estimates of the fractional...

Persistent link: https://www.econbiz.de/10011382237

Option Pricing and Hedging for Discrete Time Regime-Switching Models

Remillard, Bruno - 2014

We propose optimal mean-variance dynamic hedging strategies in discrete time under a multivariate Gaussian regime-switching model. The methodology, which also performs pricing, is robust to time-varying and clustering risk observed in financial time series. As such, it overcomes the main...

Persistent link: https://www.econbiz.de/10013069998

Option Pricing and Hedging for Regime-Switching Geometric Brownian Motion Models

Remillard, Bruno - 2016

We find the variance-optimal equivalent martingale measure when multivariate assets are modeled by a regime-switching geometric Brownian motion, and the regimes are represented by a homogeneous continuous time Markov chain. Under this new measure, the Markov chain driving the regimes is no...

Persistent link: https://www.econbiz.de/10013004851

Markov-Chain Approximation and Estimation of Nonlinear, Non-Gaussian State Space Models

Farmer, Leland - 2014

I develop a new method for approximating and estimating nonlinear, non-Gaussian state space models. I show that any such model can be well approximated by a discrete-state Markov process and estimated using techniques developed in Hamilton (1989). Through Monte Carlo simulations, I demonstrate...

Persistent link: https://www.econbiz.de/10013048908

A moment-matching method for approximating vector autoregressive processes by finite-state Markov chains

Gospodinov, Nikolaj; Lkhagvasuren, Damba - 2013

This paper proposes a moment-matching method for approximating vector autoregressions by finite-state Markov chains. The Markov chain is constructed by targeting the conditional moments of the underlying continuous process. The proposed method is more robust to the number of discrete values and...

Persistent link: https://www.econbiz.de/10010126857

Hermite Expansion of Transition Densities and European Option Prices for Multivariate Diffusions with Jumps

Wan, Xiangwei - 2020

This paper shows that a small-time Hermite expansion is feasible for multivariate diffusions. By introducing an innovative quasi-Lamperti transform, which unitizes the diffusion matrix at the initial time, we derive explicit recursive formulas for the expansion coefficients of transition...

Persistent link: https://www.econbiz.de/10012848735

Bayesian Estimation of Asymmetric Jump-Diffusion Processes

Frame, Samuel; Ramezani, Cyrus A. - 2013

The hypothesis that asset returns are log-normally distributed has been widely rejected. The extant literature has shown that empirical asset returns are highly skewed and leptokurtic (fat tails). The Affine Jump-Diffusion (AJD) model improves upon the log-normal specification by adding a jump...

Persistent link: https://www.econbiz.de/10014161444

Non-Stationary and No Moments Asymptotics of the Arch Model

Rahbek, Anders; Jensen, Soren Tolver - 2002

We establish consistency and asymptotic normality of the quasi-maximum likelihood estimator in the linear ARCH model. Contrary to existing literature we allow the parameters to be in the region where no stationary version of the process exists

Persistent link: https://www.econbiz.de/10014104835

A Weak Bifurcation Theory for Discrete Time Stochastic Dynamical Systems

Diks, Cees G. H.; Wagener, Florian Oskar Ottokar - 2006

This article presents a bifurcation theory of smooth stochastic dynamical systems that are governed by everywhere … of the system. By introducing a weak equivalence notion of these dependence ratios, we arrive at a bifurcation theory for … which in the compact case, the set of stable (non-bifurcating) systems is open and dense. The theory is illustrated with …

Persistent link: https://www.econbiz.de/10014058411