In this article we propose a model in discrete and continuous time that incorporates explicitly a technical trading rule in the specification of the volatility. The proposed discrete-time model is an alternative to GARCH-type processes. We derive conditions for the covariance and strict...

We propose a new nonparametric density forecast based on time- and state‐domain smoothing. We analyze some of its asymptotic properties and provide an empirical illustration. Copyright (C) 2010 John Wiley & Sons, Ltd.

In this work we motivate the use of second-order stochastic differential equations in economics and finance. We provide an empirical illustration and discuss a parametric second-order stochastic differential equation for stock prices and exchange rates.

This article presents a new simulation-based technique for estimating the likelihood of stochastic differential equations. This technique is based on a result of Dacunha-Castelle and Florens-Zmirou. These authors proved that the transition densities of a nonlinear diffusion process with a...