Calibration for multivariate Lévy-driven Ornstein-Uhlenbeck processes with applications to weak subordination

DOI10.1007/S11203-021-09254-4zbMATH Open1493.62503arXiv2011.14542OpenAlexW3210312877MaRDI QIDQ2144199FDOQ2144199

Authors: Kevin W. Lu 

Publication date: 1 June 2022

Published in: Statistical Inference for Stochastic Processes (Search for Journal in Brave)

Abstract: Consider a multivariate L'evy-driven Ornstein-Uhlenbeck process where the stationary distribution or background driving L'evy process is from a parametric family. We derive the likelihood function assuming that the innovation term is absolutely continuous. Two examples are studied in detail: the process where the stationary distribution or background driving L'evy process is given by a weak variance alpha-gamma process, which is a multivariate generalisation of the variance gamma process created using weak subordination. In the former case, we give an explicit representation of the background driving L'evy process, leading to an innovation term which is discrete and continuous mixture, allowing for the exact simulation of the process, and a separate likelihood function. In the latter case, we show the innovation term is absolutely continuous. The results of a simulation study demonstrate that maximum likelihood numerically computed using Fourier inversion can be applied to accurately estimate the parameters in both cases.

Full work available at URL: https://arxiv.org/abs/2011.14542

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zbMATH Keywords

Ornstein-Uhlenbeck processlikelihood inferenceself-decomposabilityvariance gamma processmultivariate subordinationweak subordinationLévy process

Mathematics Subject Classification ID

Characteristic functions; other transforms (60E10) Processes with independent increments; Lévy processes (60G51) Point estimation (62F10) Markov processes: estimation; hidden Markov models (62M05) Stationary stochastic processes (60G10) Stochastic integrals (60H05)

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Cited In (3)

• Ornstein-Uhlenbeck process driven by \(\alpha\)-stable process and its gamma subordination
• Monte Carlo Simulation for Trading Under a Lévy-Driven Mean-Reverting Framework
• Calibration for weak variance-alpha-gamma processes

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