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PARAMETER ESTIMATION FOR GEOMETRIC L EVY PROCESSES WITH STOCHASTIC VOLATILITY
| Title: | PARAMETER ESTIMATION FOR GEOMETRIC L EVY PROCESSES WITH STOCHASTIC VOLATILITY. |
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| Name(s): |
Chhetri, Sher B., author Long, Hongwei, Thesis advisor Florida Atlantic University, Degree grantor Charles E. Schmidt College of Science Department of Mathematical Sciences |
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| Type of Resource: | text | |
| Genre: | Electronic Thesis Or Dissertation | |
| Date Created: | 2019 | |
| Date Issued: | 2019 | |
| Publisher: | Florida Atlantic University | |
| Place of Publication: | Boca Raton, Fla. | |
| Physical Form: | application/pdf | |
| Extent: | 95 p. | |
| Language(s): | English | |
| Abstract/Description: | In finance, various stochastic models have been used to describe the price movements of financial instruments. After Merton's [38] seminal work, several jump diffusion models for option pricing and risk management have been proposed. In this dissertation, we add alpha-stable Levy motion to the process related to dynamics of log-returns in the Black-Scholes model where the volatility is assumed to be constant. We use the sample characteristic function approach in order to study parameter estimation for discretely observed stochastic differential equations driven by Levy noises. We also discuss the consistency and asymptotic properties of the proposed estimators. Simulation results of the model are also presented to show the validity of the estimators. We then propose a new model where the volatility is not a constant. We consider generalized alpha-stable geometric Levy processes where the stochastic volatility follows the Cox-Ingersoll-Ross (CIR) model in Cox et al. [9]. A number of methods have been proposed for estimating parameters for stable laws. However, a complication arises in estimation of the parameters in our model because of the presence of the unobservable stochastic volatility. To combat this complication we use the sample characteristic function method proposed by Press [48] and the conditional least squares method as mentioned in Overbeck and Ryden [47] to estimate all the parameters. We then discuss the consistency and asymptotic properties of the proposed estimators and establish a Central Limit Theorem. We perform simulations to assess the validity of the estimators. We also present several tables to show the comparison of estimators using different choices of arguments ui's. We conclude that all the estimators converge as expected regardless of the choice of ui's. | |
| Identifier: | FA00013294 (IID) | |
| Degree granted: | Dissertation (Ph.D.)--Florida Atlantic University, 2019. | |
| Collection: | FAU Electronic Theses and Dissertations Collection | |
| Note(s): | Includes bibliography. | |
| Subject(s): |
Stochastic models Lévy processes Parameter estimation Finance Simulations |
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| Held by: | Florida Atlantic University Libraries | |
| Sublocation: | Digital Library | |
| Persistent Link to This Record: | http://purl.flvc.org/fau/fd/FA00013294 | |
| Use and Reproduction: | Copyright © is held by the author with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder. | |
| Use and Reproduction: | http://rightsstatements.org/vocab/InC/1.0/ | |
| Host Institution: | FAU | |
| Is Part of Series: | Florida Atlantic University Digital Library Collections. |
