Stochastic Volatility Models as Hidden Markov Models and Statistical Applications
Stochastic Volatility Models as Hidden Markov Models and Statistical Applications
This paper deals with the fixed sampling interval case for stochastic volatility models. We consider a two-dimensional diffusion process (Y-t, V-t), where only (Y-t) is observed at n discrete times with regular sampling interval Delta. The unobserved coordinate (V-t) is ergodic and rules the diffusion coefficient (volatility) of (Y-t). We …