Characteristic function estimation of non-Gaussian Ornstein-Uhlenbeck processes

Emanuele Taufer

No 805, DISA Working Papers from Department of Computer and Management Sciences, University of Trento, Italy

Abstract: Continuous non-Gaussian stationary processes of the OU-type are becoming increasingly popular given their flexibility in modelling stylized features of financial series such as asymmetry, heavy tails and jumps. The use of non-Gaussian marginal distributions makes likelihood analysis of these processes unfeasible for virtually all cases of interest. This paper exploits the self-decomposability of the marginal laws of OU processes to provide explicit expressions of the characteristic function which can be applied to several models as well as to develop e±cient estimation techniques based on the empirical characteristic function. Extensions to OU-based stochastic volatility models are provided.

Keywords: Ornstein-Uhlenbeck process; Lévy process; self-decomposable distribution; characteristic function; estimation (search for similar items in EconPapers)
Pages: 20 pages
Date: 2008-07, Revised 2008-07-07
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (7)

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