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Statistical Properties and Economic Implications of Jump-Diffusion Processes with Shot-Noise Effects

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  • Manuel Moreno

    ()

  • Pedro Jose Serrano

    ()

  • Winfried Stute

    ()

Abstract

This paper analyzes the Shot-Noise Jump-Diffusion model of Altmann, Schmidt and Stute (2008), which introduces a new situation where the effects of the arrival of rare, shocking information to the financial markets may fade away in the long run. We analyze several economic implications of the model, providing an analytical expression for the process distribution. We also prove that certain specifications of this model can provide negative serial persistence. Additionally, we find that the degree of serial autocorrelation is related to the arrival and magnitude of abnormal information. Finally, a GMM framework is proposed to estimate the model parameters.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía de la Empresa in its series Business Economics Working Papers with number wb084912.

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Date of creation: Oct 2008
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Handle: RePEc:cte:wbrepe:wb084912

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Keywords: Filtered Poisson Process; Characteristic Function; Generalized Method of Moments;

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Cited by:
  1. Thorsten Schmidt, 2014. "Catastrophe Insurance Modeled by Shot-Noise Processes," Risks, MDPI, Open Access Journal, vol. 2(1), pages 3-24, February.
  2. Fu, Jun & Yang, Hailiang, 2012. "Equilibruim approach of asset pricing under Lévy process," European Journal of Operational Research, Elsevier, vol. 223(3), pages 701-708.

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