Estimation of Diffusions using Wavelet scaling methods
In continuous time, diffusion processes have been used for modelling financial dynamics for a long time. For example the Ornstein-Uhlenbeck process (the simplest mean-reverting process)has been used to model non-speculative price processes. The Cox-Ingersoll-Ross process is widely used to model interest rate dynamics. We discuss parameter estimation of these processes using a new method, namely a Wavelet filter method. This approach is useful as it turns out that the resulting covariance function is decorrelated. We use Monte Carlo simulation to report the distribution of estimates.
|Date of creation:||01 Apr 2001|
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- E. Roy Weintraub, 1992. "Introduction," History of Political Economy, Duke University Press, vol. 24(5), pages 3-12, Supplemen.
- repec:cup:etheor:v:13:y:1997:i:3:p:430-61 is not listed on IDEAS
- Overbeck, Ludger & Rydén, Tobias, 1997. "Estimation in the Cox-Ingersoll-Ross Model," Econometric Theory, Cambridge University Press, vol. 13(03), pages 430-461, June.
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