Simulation and inference for stochastic volatility models driven by Lévy processes

Matthew P. S. Gander and David A. Stephens

Biometrika, 2007, vol. 94, issue 3, 627-646

Abstract: We study Ornstein-Uhlenbeck stochastic processes driven by Lévy processes, and extend them to more general non-Ornstein-Uhlenbeck models. In particular, we investigate the means of making the correlation structure in the volatility process more flexible. For one model, we implement a method for introducing quasi long-memory into the volatility model. We demonstrate that the models can be fitted to real share price returns data. Copyright 2007, Oxford University Press.

Date: 2007
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