Discretely Observed Brownian Motion Governed by Telegraph Process: Estimation

Vladimir Pozdnyakov (), L. Mark Elbroch, Anthony Labarga, Thomas Meyer and Jun Yan
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Vladimir Pozdnyakov: University of Connecticut
L. Mark Elbroch: Panthera
Anthony Labarga: University of Connecticut
Thomas Meyer: University of Connecticut
Jun Yan: University of Connecticut

Methodology and Computing in Applied Probability, 2019, vol. 21, issue 3, 907-920

Abstract: Abstract A Brownian motion whose infinitesimal variance alternates according to a telegraph process is considered. This stochastic process can be employed to model a variety of real-word situations, such as animal movement in ecology and stochastic volatility in mathematical finance. The main goal is to develop an estimation procedure for the underlying model parameters when the process is observed at discrete, possibly irregularly spaced time points. The sequence of observations is not Markov, but the sequence of the state of the telegraph process, if observed, is Markov. The observed sequence is therefore from a hidden Markov model. Likelihood inference is developed via dynamic programming, and is demonstrated to have much higher efficiency than the composite likelihood approach that was applied in an earlier work. The model is applied to model the movement of a mountain lion.

Keywords: Markov process; Dynamic programming; Likelihood estimation; 62M05; 62P10 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11009-017-9547-6

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