Bias in the Mean Reversion Estimator in Continuous-Time Gaussian and Levy Processes
This paper develops the approximate nite-sample bias of the ordinary least squares or quasi maximum likelihood estimator of the mean reversion parameter in continuous-time Levy processes. For the special case of Gaussian processes, our results reduce to those of Tang and Chen (2009) (when the long-run mean is unknown) and Yu (2012) (when the long-run mean is known). Simulations show that in general the approximate bias works well in capturing the true bias of the mean reversion estimator under di erence scenarios. However, when the time span is small and the mean reversion parameter is approaching its lower bound, we nd it more dicult to approximate well the nite-sample bias.
|Date of creation:||Feb 2013|
|Date of revision:|
|Publication status:||Published in SMU-SKBI CoFie Working Paper|
|Contact details of provider:|| Postal: 50 Stamford Road, Singapore 178903|
Phone: (65) 6828 0877
Fax: (65) 6828 0888
Web page: http://www.smu.edu.sg/institutes/skbife/index.asp
More information through EDIRC
|Order Information:|| Email: |
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.:
- Yu, Jun, 2012.
"Bias in the estimation of the mean reversion parameter in continuous time models,"
Journal of Econometrics,
Elsevier, vol. 169(1), pages 114-122.
- Jun Yu, 2009. "Bias in the Estimation of the Mean Reversion Parameter in Continuous Time Models," Microeconomics Working Papers 23045, East Asian Bureau of Economic Research.
- Jun Yu, 2009. "Bias in the Estimation of the Mean Reversion Parameter in Continuous Time Models," Working Papers 16-2009, Singapore Management University, School of Economics.
- Jun Yu, 2007. "Bias in the Estimation of the Mean Reversion Parameter in Continuous Time Models," Working Papers CoFie-06-2008, Sim Kee Boon Institute for Financial Economics, revised Oct 2008.
- Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
- Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 627-627, November.
- Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
- Ullah, Aman, 2004. "Finite Sample Econometrics," OUP Catalogue, Oxford University Press, edition 1, number 9780198774488, May.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
When requesting a correction, please mention this item's handle: RePEc:skb:wpaper:cofie-03-2013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sim Kee Boon Institute for Financial Economics)
If references are entirely missing, you can add them using this form.