[Statlist] Next talk: Friday, 15.11.2013 with Dennis Kristensen, University College London

[Cecilia Rey]

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ETH and University of Zurich

Organisers:
Proff. P. Bühlmann - L. Held - T. Hothorn - H.R. Kuensch - M. Maathuis - 
N. Meinshausen - S. van de Geer - M. Wolf

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We are glad to announce the following talk

Friday, November 15, 2013, 15.15h,  ETH Zurich HG G 19.1

with Dennis Kristensen, University College London
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Title:
Limited information likelihood inference in stochastic volatility jump-diffusion models

Abstract:
We develop a novel method for estimation and filtering of continuous-time models with stochastic volatility and jumps using so-called Approximate Bayesian Computation which build likelihoods based on limited information. The proposed estimators are computationally attractive relative to standard likelihood-based estimators since they rely on low-dimensional auxiliary statistics and so avoid computation of high-dimensional integrals. We also develop a simple filtering algorithm that allows one to track the latent volatility process in real time without any heavy computational burden. Despite their computational simplicity, we find that estimators and filters perform well in practice and lead to precise estimates of model parameters and latent variables. We show how the methods can incorporate intra-daily information to improve on the estimation and filter- ing. In particular, the availability of realized volatility measures help us in learning about parameters and latent states. The method is employed in the estimation of a flexible stochastic volatility model for the dynamics of the Stoxx50 equity index. We find evidence of the presence of jumps and in favor of a structural break in parameters. During the recent financial crisis, volatility has a higher mean and variance, and is less persistent than before the crisis. Jumps occur slightly less frequently, and are more likely to be negative when they do occur.

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This abstract is also to be found under the following link: http://stat.ethz.ch/events/research_seminar
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