Estimation of Diffusions using Wavelet scaling methods

Esben Hoeg

No 255, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: 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.

Keywords: Ornstein-Uhlenbeck process; CIR model; Wavelet transform (search for similar items in EconPapers)
JEL-codes: C0 C4 G0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets
Date: 2001-04-01
View list of references

Downloads: (external link)
http://www.asb.dk/ifi/eh/sce-eh.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:sce:scecf1:255

Access Statistics for this paper

More papers in Computing in Economics and Finance 2001 from Society for Computational Economics
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().