Goodness–of–Fit Test for Stochastic Volatility Models

Wenceslao González-Manteiga (), Jorge Passamani Zubelli (), Abelardo Monsalve-Cobis () and Manuel Febrero-Bande ()
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Wenceslao González-Manteiga: University of Santiago de Compostela, Faculty of Mathematics
Jorge Passamani Zubelli: Institute for Pure and Applied Mathematics (IMPA)
Abelardo Monsalve-Cobis: University Centroccidental Lisandro Alvarado
Manuel Febrero-Bande: University of Santiago de Compostela, Faculty of Mathematics

Chapter Chapter 6 in From Statistics to Mathematical Finance, 2017, pp 89-104 from Springer

Abstract: Abstract A goodness–of–fit test based on empirical processes is proposed as a model diagnostic check method for continuous time stochastic volatility models. More specifically, as the volatility is not observable, a marked empirical process is constructed from the representation in a state space model form associated to the discretized version of the underlying process. Distributions of these processes are approximated using bootstrap techniques. Some simulation results and an empirical application to an EURIBOR (Euro Interbank Offered Rate) data set are presented for illustration.

Date: 2017
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DOI: 10.1007/978-3-319-50986-0_6

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