Estimation of Jump-Diffusion Process vis Empirical Characteristic Function

Michael Rockinger () and Maria Semenova ()

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: This article proposes an estimation procedure for the affine stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint (here bi-variate) unconditional characteristic function for the stochastic process for which we derive a closed form expression. The estimation of the general model and of various restrictions, on S&P 500 data, is performed using the continuous empirical characteristic function method. The estimation suggests that besides a stochastic volatility, jumps both in the mean and the volatility equation are relevant.

Keywords: Modeling asset prices; Affine-jump-diffusions; Characteristic functions; Stochastic volatility; Empirical estimation (search for similar items in EconPapers)
JEL-codes: C22 C52 G12 (search for similar items in EconPapers)
Date: 2005-06
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (1)

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