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Recursive estimation for continuous time stochastic volatility models

✍ Scribed by H. Gong; A. Thavaneswaran

Publisher: Elsevier Science
Year: 2009
Tongue: English
Weight: 401 KB
Volume: 22
Category: Article
ISSN: 0893-9659
DOI: 10.1016/j.aml.2009.06.014

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✦ Synopsis

Volatility plays an important role in portfolio management and option pricing. Recently, there has been a growing interest in modeling volatility of the observed process by nonlinear stochastic process [S.J. Taylor, Asset Price Dynamics, Volatility, and Prediction, Princeton University Press, 2005; H. Kawakatsu, Specification and estimation of discrete time quadratic stochastic volatility models, Journal of Empirical Finance 14 (2007) 424-442]. In [H. Gong, A. Thavaneswaran, J. Singh, Filtering for some time series models by using transformation, Math Scientist 33 (2008) 141-147], we have studied the recursive estimates for discrete time stochastic volatility models driven by normal errors. In this paper, we study the recursive estimates for various classes of continuous time nonlinear non-Gaussian stochastic volatility models used for option pricing in finance.

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