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Are These Shocks for Real? Sensitivity Analysis of the Significance of the Wavelet Response to Some CKLS Processes

Author

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  • Somayeh Kokabisaghi

    (Centrum Wiskunde & Informatica (CWI), Science Park 123, 1098 XG Amsterdam, The Netherlands)

  • Eric J. Pauwels

    (Centrum Wiskunde & Informatica (CWI), Science Park 123, 1098 XG Amsterdam, The Netherlands)

  • Katrien Van Meulder

    (QuantEssential, Partisanenstraat 35, 3010 Leuven, Belgium)

  • André B. Dorsman

    (Vrije Universiteit (VU), De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands)

Abstract

The CKLS process (introduced by Chan, Karolyi, Longstaff, and Sanders) is a typical example of a mean-reverting process. It combines random fluctuations with an elastic attraction force that tends to restore the process to a central value. As such, it is widely used to model the stochastic behaviour of various financial assets. However, the calibration of CKLS processes can be problematic, resulting in high levels of uncertainty on the parameter estimates. In this paper we show that it is still possible to draw solid conclusions about certain qualitative aspects of the time series, as the corresponding indicators are relatively insensitive to changes in the CKLS parameters.

Suggested Citation

  • Somayeh Kokabisaghi & Eric J. Pauwels & Katrien Van Meulder & André B. Dorsman, 2018. "Are These Shocks for Real? Sensitivity Analysis of the Significance of the Wavelet Response to Some CKLS Processes," IJFS, MDPI, vol. 6(3), pages 1-12, September.
    • Handle: RePEc:gam:jijfss:v:6:y:2018:i:3:p:76-:d:167325
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    Cited by:

    1. Somayeh Kokabisaghi & Mohammadesmaeil Ezazi & Reza Tehrani & Nourmohammad Yaghoubi, 2019. "Sanction or Financial Crisis? An Artificial Neural Network-Based Approach to model the impact of oil price volatility on Stock and industry indices," Papers 1912.04015, arXiv.org, revised Sep 2020.

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