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A survey of sequential Monte Carlo methods for economics and finance

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  • Creal, D.

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

Abstract

This paper serves as an introduction and survey for economists to the field of sequential Monte Carlo methods which are also known as particle filters. Sequential Monte Carlo methods are simulation based algorithms used to compute the high-dimensional and/or complex integrals that arise regularly in applied work. These methods are becoming increasingly popular in economics and finance; from dynamic stochastic general equilibrium models in macro-economics to option pricing. The objective of this paper is to explain the basics of the methodology, provide references to the literature, and cover some of the theoretical results that justify the methods in practice.

Suggested Citation

  • Creal, D., 2009. "A survey of sequential Monte Carlo methods for economics and finance," Serie Research Memoranda 0018, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:2009-18
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    References listed on IDEAS

    as
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    6. Nicolas Chopin, 2002. "Central Limit Theorem for Sequential Monte Carlo Methods and its Applications to Bayesian Inference," Working Papers 2002-44, Center for Research in Economics and Statistics.
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    15. Jasra, Ajay & Doucet, Arnaud & Stephens, David A. & Holmes, Christopher C., 2008. "Interacting sequential Monte Carlo samplers for trans-dimensional simulation," Computational Statistics & Data Analysis, Elsevier, vol. 52(4), pages 1765-1791, January.
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    More about this item

    Keywords

    state space models; sequential Monte Carlo; particle filter; Markov chain Monte Carlo; Kalman filter;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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