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Simulation of Lévy-driven Ornstein-Uhlenbeck processes with given marginal distribution

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Author Info
Emanuele Taufer () (DISA, Faculty of Economics, Trento University)
Nikolai Leonenko

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Abstract

We provide a simulation procedure for obtaining discretely observed values of Ornstein-Uhlenbeck processes with given (self-decomposable) marginal distribution. The method proposed, based on inversion of the characteristic function, completely circumvent problems encountered when trying to reproduce small jumps of Lévy processes. We provide error bounds for our procedure and asses numerically its performance.

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Publisher Info
Paper provided by Department of Computer and Management Sciences, University of Trento, Italy in its series Quaderni DISA with number 123.

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Date of creation: Nov 2007
Date of revision: 23 May 2007
Handle: RePEc:trt:disatr:123

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Related research
Keywords: ornstein-uhlenbeck process; lévy process; self-decomposable distribution; characteristic function; simulation;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics," Journal Of The Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241. [Downloadable!] (restricted)
  2. Ole E. Barndorff-Nielsen, 2003. "Integrated OU Processes and Non-Gaussian OU-based Stochastic Volatility Models," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics, Finnish Statistical Society, Norwegian Statistical Association and Swedish Statistical Association, vol. 30(2), pages 277-295. [Downloadable!] (restricted)
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  1. Emanuele Taufer, 2008. "Characteristic function estimation of non-Gaussian Ornstein-Uhlenbeck processes," DISA Working Papers 0805, Department of Computer and Management Sciences, University of Trento, Italy, revised 07 Jul 2008. [Downloadable!]
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