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Estimation of Jump-Diffusion Process vis Empirical Characteristic Function

  • Michael Rockinger

    ()

  • Maria Semenova

    ()

This article proposes an estimation procedure for the affine stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint (here bi-variate) unconditional characteristic function for the stochastic process for which we derive a closed form expression. The estimation of the general model and of various restrictions, on S&P 500 data, is performed using the continuous empirical characteristic function method. The estimation suggests that besides a stochastic volatility, jumps both in the mean and the volatility equation are relevant.

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Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp150.

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Date of creation: Jun 2005
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Handle: RePEc:fam:rpseri:rp150
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