Robust parameter estimation for asset price models with Markov modulated volatilities

✍ Scribed by R.J. Elliott; W.P. Malcolm; Allanus H. Tsoi

• Publisher: Elsevier Science
• Year: 2003
• Tongue: English
• Weight: 238 KB
• Volume: 27
• Category: Article
• ISSN: 0165-1889
• DOI: 10.1016/s0165-1889(02)00064-7

✦ Synopsis

In this paper, we apply a robust form of ÿltering equations for a continuous time hidden Markov model to estimate the volatility of a risky asset. The robust form of the ÿlters we consider o ers substantial improvement over classical ÿltering by completely eliminating stochastic integrations completely. A simulation study is included to indicate the beneÿts. ?