STOCHASTIC APPROACH TO INDEX NUMBERS FOR MULTILATERAL PRICE COMPARISONS AND THEIR STANDARD ERRORS

On the Stochastic Approach to Index Numbers

Measuring inflation through stochastic approach to index numbers

This study attempts to estimate the rate of inflation in Pakistan by the stochastic approach to index numbers by allowing systematic changes in relative prices. This approach provides not only point estimate but also confidence interval for the rate of inflation. There are two types of approaches to index number theory namely: the functional economic approaches and the stochastic approach. The ...

a benchmarking approach to optimal asset allocation for insurers and pension funds

uncertainty in the financial market will be driven by underlying brownian motions, while the assets are assumed to be general stochastic processes adapted to the filtration of the brownian motions. the goal of this study is to calculate the accumulated wealth in order to optimize the expected terminal value using a suitable utility function. this thesis introduced the lim-wong’s benchmark fun...

Multilateral productivity comparisons and homotheticity

In this paper it is shown that a well known procedure (GEKS) of transitivizing a bilateral system of productivity comparisons is implicitly a way of imposing a homothetic structure onto the data. The main implication of this result is that deviations between the bilateral and the multilateral (GEKS) indexes can be interpreted as a measure of local deviation from the homothetic assumption. This ...

Option price sensitivity to errors in stochastic dynamics modeling

When asset prices are modelled by stochastic dynamics, the model parameters are estimated from financial data. We study how estimation errors on model parameters impact the computed option prices, in the case where asset price and volatility follow the classical joint stochastic differential equations (SDEs) parametric model of Heston. Model parameters are estimated by an approximate maximum li...