Filtering and identification of Heston's stochastic volatility model and its market risk

Share/Save/Bookmark

Aihara, ShinIchi and Bagchi, Arunabha (2006) Filtering and identification of Heston's stochastic volatility model and its market risk. Journal of economic dynamics & control, 30 (12). pp. 2363-2388. ISSN 0165-1889

[img] PDF
Restricted to UT campus only
: Request a copy
594kB
Abstract:We study the filtering problem for the stochastic volatility model of Heston by using the nonlinear estimation theory. To solve the estimation problem for the stochastic volatility process, we use the random time change method. The derived basic equation for the filtering is the so-called Zakai equation and its numerically realized algorithm is proposed with the aid of the splitting-up method. Regarding the European call option problem, the identification of the market price of the volatility risk is also studied. Some numerical simulation studies are demonstrated to show the advantage of the proposed method.
Item Type:Article
Copyright:© 2006 Elsevier Science
Faculty:
Electrical Engineering, Mathematics and Computer Science (EEMCS)
Research Group:
Link to this item:http://purl.utwente.nl/publications/62910
Official URL:http://dx.doi.org/10.1016/j.jedc.2005.06.017
Export this item as:BibTeX
EndNote
HTML Citation
Reference Manager

 

Repository Staff Only: item control page

Metis ID: 238060