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Activity Number:
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376
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Type:
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Contributed
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Date/Time:
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Tuesday, August 4, 2009 : 2:00 PM to 3:50 PM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #303568 |
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Title:
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Parameter Estimation for Multivariate Stochastic Differential Equations
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Author(s):
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Shan Yang*+ and Song Xi Chen
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Companies:
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Iowa State University and Iowa State University
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Address:
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644 Squaw Creek Dr. Unit 13, Ames, IA, 50010,
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Keywords:
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Bias ; estimating equation ; multivariate diffusion process ; stochastic differential equation ; tensor method
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Abstract:
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We consider in this paper parameter estimation for multi-factor stochastic processes defined by stochastic differential equations. The class of processes considered include multivariate diffusion and jump-diffusion processes which are popular processes in modeling the dynamics of financial assets. We quantify the bias and variance by developing theoretical expansions for a large class of estimators which includes as special cases estimators based on the maximum likelihood, approximate likelihood and discretizations. We apply the proposed methods to evaluate bias in estimated contingent claims. We also provide simulation results for a set of popular multi-factor processes to confirm our theory.
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