Inference for Non-linear Diffusions and Jump-Diffusions: A Monte Carlo EM approach

Research output: Chapter in Book/Report/Conference proceedingPaper in conference proceedingpeer-review

Abstract

We propose a simple, general and computationally efficient algorithm for maximum likelihood estima-
tion (MLE) of parameters in diffusion and jump-diffusion processes. This is conducted within a Monte Carlo
EM-algorithm, where the smoothing distribution is computed using resampling. The results are encouraging as
we can approximate the MLE well for the models studied when using simulated data. We also obtain reasonable
estimates, compared to other papers, when fitting the Heston and Bates model to S&P 500 and VIX data.
Original languageEnglish
Title of host publicationRecent Researches in Automatic Control and Electronics, Proceedings of the 14th International Conference on Automatic Control, Modelling & Simulation (ACMOS '12)
EditorsVincenzo Nola, Michel Kadoch, Alexander Zemilak
PublisherWSEAS Press
Pages110-115
Number of pages6
ISBN (Print)978-1-61804-080-0
Publication statusPublished - 2012
Event14th International Conference on Automatic Control, Modelling & Simulation (ACMOS '12) - Saint Malo & Mont Saint-Michel, Frankrike
Duration: 2012 Apr 22012 Apr 4

Conference

Conference14th International Conference on Automatic Control, Modelling & Simulation (ACMOS '12)
Period2012/04/022012/04/04

Bibliographical note

The 14th International Conference on Automatic Control, Modelling & Simulation (ACMOS '12) was held in Saint Malo & Mont Saint-Michel, France, April 2-4, 2012 in conjunction with:
The 11th International Conference on Microelectronics,
Nanoelectronics, Optoelectronics (MINO '12);
the 11th International Conference on Telecommunications and
Informatics (TELE-INFO '12);
the 11th International Conference on Signal Processing (SIP '12);
the 2nd International Conference on Environment, Economics,
Energy, Devices, Systems, Communications, Computers,
Mathematics (EDSCM '13)

Subject classification (UKÄ)

  • Probability Theory and Statistics

Free keywords

  • Jump-diffusions
  • Maximum Likelihood estimation
  • MCEM-algorithm
  • Resampling
  • Heston model
  • Bates model

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