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Characteristic function estimation of non-Gaussian Ornstein-Uhlenbeck processes

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  • Emanuele Taufer

    (DISA, Faculty of Economics, Trento University)

Abstract

Continuous non-Gaussian stationary processes of the OU-type are becoming increasingly popular given their flexibility in modelling stylized features of financial series such as asymmetry, heavy tails and jumps. The use of non-Gaussian marginal distributions makes likelihood analysis of these processes unfeasible for virtually all cases of interest. This paper exploits the self-decomposability of the marginal laws of OU processes to provide explicit expressions of the characteristic function which can be applied to several models as well as to develop e±cient estimation techniques based on the empirical characteristic function. Extensions to OU-based stochastic volatility models are provided.

Suggested Citation

  • Emanuele Taufer, 2008. "Characteristic function estimation of non-Gaussian Ornstein-Uhlenbeck processes," DISA Working Papers 0805, Department of Computer and Management Sciences, University of Trento, Italy, revised 07 Jul 2008.
    • Handle: RePEc:trt:disawp:0805
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nikolai Leonenko & EStuart Petherick & Emanuele Taufer, 2012. "Multifractal Scaling for Risky Asset Modelling," DISA Working Papers 2012/07, Department of Computer and Management Sciences, University of Trento, Italy, revised Jul 2012.
    2. Francq, Christian & Meintanis, Simos, 2012. "Fourier--type estimation of the power garch model with stable--paretian innovations," MPRA Paper 41667, University Library of Munich, Germany.
    3. Taufer, Emanuele & Leonenko, Nikolai & Bee, Marco, 2011. "Characteristic function estimation of Ornstein-Uhlenbeck-based stochastic volatility models," Computational Statistics & Data Analysis, Elsevier, vol. 55(8), pages 2525-2539, August.
    4. Shibin Zhang & Xinsheng Zhang, 2013. "A least squares estimator for discretely observed Ornstein–Uhlenbeck processes driven by symmetric α-stable motions," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 65(1), pages 89-103, February.
    5. Taufer, Emanuele, 2015. "On the empirical process of strongly dependent stable random variables: asymptotic properties, simulation and applications," Statistics & Probability Letters, Elsevier, vol. 106(C), pages 262-271.
    6. Leonenko, Nikolai & Petherick, Stuart & Taufer, Emanuele, 2013. "Multifractal models via products of geometric OU-processes: Review and applications," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(1), pages 7-16.
    7. Simos G. Meintanis & James Allison & Leonard Santana, 2016. "Goodness-of-fit tests for semiparametric and parametric hypotheses based on the probability weighted empirical characteristic function," Statistical Papers, Springer, vol. 57(4), pages 957-976, December.

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    More about this item

    Keywords

    Ornstein-Uhlenbeck process; Lévy process; self-decomposable distribution; characteristic function; estimation;
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