Journal
COMPUTATIONAL STATISTICS & DATA ANALYSIS
Volume 100, Issue -, Pages 560-581Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.csda.2014.08.010
Keywords
Split-SV process; Noise-indicator; Contaminated Gaussian distribution; Convolutions; Empirical characteristic function estimation
Funding
- Serbian Ministry of Education, Science and Technological Development [OI 174007, OI 174015]
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A modification of one of the most popular stochastic model in describing financial indexes dynamics is introduced. For describing a nonlinear behavior of volatility, a threshold noise indicator in the autoregressive time series of stochastic volatility is used. Toward this end, the model named the Split-SV model is introduced and its basic stochastic properties are investigated. Furthermore, the Empirical Characteristic Function (ECF) method is used for obtaining the parameter estimations of the model and a numerical simulation of the obtained estimates is given as well. Finally, the Split-SV model is applied for fitting the empirical data: the daily returns of the exchange rates of GBP and USD per euro. (C) 2014 Elsevier B.V. All rights reserved.
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