We develop a nonparametric specification test for continuous-time models using the transition density. Using a data transform and correcting for the boundary bias of kernel estimators, our test is robust to serial dependence in data and provides excellent finite sample performance. Besides univariate diffusion models, our test is applicable to a wide variety of continuous-time and discrete-time...

This paper introduces and studies the econometric properties of a general new class of models, which I refer to as jump-driven stochastic volatility models, in which the volatility is a moving average of past jumps. I focus attention on two particular semiparametric classes of jump-driven stochastic volatility models. In the first the price has a continuous component with time-varying volatilit...

We propose an efficient method to evaluate callable and putable bonds under a wide class of interest rate models, including the popular short rate diffusion models, as well as their time changed versions with jumps. The method is based on the eigenfunction expansion of the pricing operator. Given the set of call and put dates, the callable and putable bond pricing function is the value function...

In this paper we consider two processes driven by diffusions and jumps. We consider both finite activity and infinite activity jump components. Given discrete observations we disentangle the covariation between the two diffusion parts from the co-jumps. A commonly used approach to estimate the diffusion covariation part is to take the sum of the cross products of the two processes increments; h...

We propose a methodology to measure the parameter estimation risk and model specification of pricing models, as well selection classes, based on realized payoffs, for products in over-the-counter market. Lévy jump models affine jump-diffusion are applied estimating fair variance strikes swaps forward starting option prices. Our results show that both significant swaps, while is dominant when op...

Although Geometric Brownian Motion and Jump Diffusion Models have largely dominated the literature on asset price modeling, studies of empirical stock data Ghana Stock Exchange led to conclusion that there are some stocks in which return processes consistently depart from these models theory as well its statistical properties. This paper gives a fundamental review development model based pure j...

Abstract:Accommodating exchange rate factors as exogenous disturbance, this paper proposes a mixed GARCH-Jump model to compares in general the volatility properties of returns series of the Shanghai composite index with those of the Dow Jones index. It also incorporates the asymmetry, clustering and leptokurtosis and fat-tail properties of returns volatility into an integrated analytic frame of...

We show that for the originally ill-posed inverse problem of calibrating a localized jump-diffusion process to given option price data, Tikhonov regularization can be used to get a well-posed optimization problem. Furthermore we prove stability as well as convergence of the regularized parameters using the forward partial integrodifferential equation associated to the European call price. By pr...

We present a simulation methodology for Bayesian estimation of rate parameters in Markov jump processes arising for example in stochastic kinetic models. To handle the problem of missing components and measurement errors in observed data, we embed the Markov jump process into the framework of a general state space model. We do not use diffusion approximations. Markov chain Monte Carlo and parti...