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Use of Adapted Particle Filters in SVJD Models

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  • Milan Fičura
  • Jiří Witzany

Abstract

Particle Filter algorithms for filtering latent states (volatility and jumps) of Stochastic-Volatility Jump-Diffusion (SVJD) models are being explained. Three versions of the SIR particle filter with adapted proposal distributions to the jump occurrences, jump sizes, and both are derived and their performance is compared in a simulation study to the un-adapted particle filter. The filter adapted to both the jump occurrences and jump sizes achieves the best performance, followed in their respective order by the filter adapted only to the jump occurrences and the filter adapted only to the jump sizes. All adapted particle filters outperformed the unadapted particle filter.

Suggested Citation

  • Milan Fičura & Jiří Witzany, 2018. "Use of Adapted Particle Filters in SVJD Models," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2018(3), pages 5-20.
    • Handle: RePEc:prg:jnlefa:v:2018:y:2018:i:3:id:211:p:05-20
    DOI: 10.18267/j.efaj.211
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Particle Filters; Stochastic Volatility; Price Jumps;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G1 - Financial Economics - - General Financial Markets

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