A nonparametric approach tothe noise density in stochastic volatility models

Simone Alfarano, Friedrich Wagner and Mishael Milaković

Applied Financial Economics Letters, 2008, vol. 4, issue 5, 311-314

Abstract: We propose a nonparametric method to determine the functional form of the noise density in discrete-time stochastic volatility models of financial returns. Our approach suggests that the assumption of Gaussian noise is often adequate, but we do observe deviations from Gaussian noise for some assets, for instance gold.

Date: 2008
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DOI: 10.1080/17446540701736010

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