Limit theorems for discretely observed stochastic volatility models (Q1275855): Difference between revisions

From MaRDI portal
Import240304020342 (talk | contribs)
Set profile property.
Set OpenAlex properties.
 
Property / OpenAlex ID
 
Property / OpenAlex ID: W2007383562 / rank
 
Normal rank

Latest revision as of 20:19, 19 March 2024

scientific article
Language Label Description Also known as
English
Limit theorems for discretely observed stochastic volatility models
scientific article

    Statements

    Limit theorems for discretely observed stochastic volatility models (English)
    0 references
    0 references
    0 references
    0 references
    12 July 1999
    0 references
    The authors consider the following two-dimensional diffusion model for stock prices with stochastic volatility: \(Y_0 = 0\), \(dY_t = \varphi(V_t) dt + V_t^{1/2} dB_t\) and \(V_0 = \eta\), \(dV_t = b(V_t) dt + a(V_t) dW_t\) where \(B\) and \(W\) are independent Wiener processes. \(Y\) is interpreted as the process of logarithmic stock prices. \(V\) is assumed to be a strictly positive, ergodic, stationary diffusion. As typical for the finance background, the volatility process \(V\) is unobservable, while one has a discrete series \(Y_{t_1}, \ldots, Y_{t_n}\) of observations for \(Y\). The authors' aim is to derive information about the stationary distribution of the hidden process \(V\) using the given discrete data for \(Y\). They assume that the observation times are regularly spaced, \(t_i = i \Delta\), and show that the empirical distribution \(\hat{P}\) of the renormalized increments \(X_i = (Y_{t_i}-Y_{t_{i-1}})/\Delta^{1/2}\) converges to a variance mixture of Gaussian laws \(P_\pi\) as the length of the sampling interval \(\Delta\) approaches zero and the total observation time \(t_n = n \Delta\) tends to infinity. Moreover, \(P_\pi\) is identified as the distribution of a random variable \(X = \varepsilon \eta^{1/2}\) where \(\varepsilon\) is standard normal distributed and independent of \(\eta=V_0\). If the asymptotic framework is such that \(n \Delta^2\) tends to zero, the authors also show that a central limit theorem holds.
    0 references
    diffusion processes
    0 references
    discrete time observations
    0 references
    empirical distributions
    0 references
    limit theorems
    0 references
    mathematical finance
    0 references
    stochastic volatility
    0 references
    0 references

    Identifiers

    0 references
    0 references
    0 references
    0 references
    0 references
    0 references