An inference method, called latent backfitting is proposed. It appears well suited for econometric models where the structural relationships of interest define the observed endogenous variables as a known function of unobserved state variables and unknown parameters. This nonlinear state space...

In this survey, we review econometric models for conducting statistical inference on option price data. We limit our review to European options on a stock index as well as to statistical methods which have been specifically developped for options. Emphasis is put on the synthesis of the various...

Latent variable models in finance originate both from asset pricing theory and time series analysis. These two strands of literature appeal to two different concepts of latent structures, which are both useful to reduce the dimension of a statistical model specified for a multivariate time...