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dc.contributor.authorChourdakis, Kyriakosen_US
dc.date.accessioned2012-09-20T13:01:57Z-
dc.date.available2012-09-20T13:01:57Z-
dc.date.issued2002en_US
dc.identifier.urihttp://hdl.handle.net/10419/62915-
dc.description.abstractA regime switching model in continuous time is introduced where a variety of jumps are allowed in addition to the diffusive component. The characteristic function of the process is derived in closed form, and is subsequently employed to create the likelihood function. In addition, standard results of the option pricing literature can be employed in order to compute derivative prices. To this end, the relationship between the physical and the risk adjusted probability measure is explored. The generic relationship between Markov chains and [jump] diffusions is also investigated, and it is shown that virtually any stochastic volatility model model can be approximated arbitrarily well by a carefully chosen continuous time Markov chain. Therefore, the approach presented here can be utilized in order to estimate, filter and carry out option pricing for such continuous state-space models, without the need for simulation based approximations. An empirical example illustrates these contributions of the paper, estimating a stochastic volatility jump diffusion model.en_US
dc.language.isoengen_US
dc.publisherQueen Mary, Univ. of London, Dep. of Economics Londonen_US
dc.relation.ispartofseriesWorking Paper, Department of Economics, Queen Mary, University of London 464en_US
dc.subject.jelG10en_US
dc.subject.jelG13en_US
dc.subject.jelC22en_US
dc.subject.ddc330en_US
dc.subject.keywordContinuous time regime switching, Stochastic volatility jump diffusion, Option pricing, Filteringen_US
dc.subject.stwStochastischer Prozessen_US
dc.subject.stwZeitreihenanalyseen_US
dc.subject.stwOptionspreistheorieen_US
dc.titleContinuous time regime switching models and applications in estimating processes with stochastic volatility and jumpsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn377019186en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Working Paper Series, School of Economics and Finance, Queen Mary, University of London

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