Showing 1 - 10 of 14
unit price of capital. Income from production is also subject to the random Brownian fluctuations. The existence of the …
Persistent link: https://www.econbiz.de/10014591050
The basic model of financial economics is the Samuelson model of geometric Brownian motion because of the celebrated Black-Scholes formula for pricing the call option. The asset's volatility is a linear function of the asset value and the model guarantees positive asset prices. In this paper, it...
Persistent link: https://www.econbiz.de/10005495432
We develop a dynamic stochastic full equilibrium New Keynesian model of two open economies based on stochastic differential equations to analyse the interdependence between monetary policy and financial markets in the context of the recent Financial crisis. The effect of bubbles on stock and...
Persistent link: https://www.econbiz.de/10010897864
We propose identifying the drift and the diffusion functions of an ergodic scalar stochastic differential equation using repeated eigenfunction estimation. The transition density will be estimated in a new way involving Kolmogorov’s backward equation, neural networks and functions of our...
Persistent link: https://www.econbiz.de/10010840310
This paper proposes a Gaussian estimator for nonlinear continuous time models of the short-term interest rate. The approach is based on a stopping time argument that produces a normalizing transformation facilitating the use of a Gaussian likelihood. A Monte Carlo study shows that the...
Persistent link: https://www.econbiz.de/10005100113
In this paper, we consider dynamic programming for the election timing in the majoritarian parliamentary system such as in Australia, where the government has a constitutional right to call an early election. This right can give the government an advantage to remain in power for as long as...
Persistent link: https://www.econbiz.de/10005050696
The generation of multivariate probability distributions follows several approaches. Within financial applications the emphasis has mostly been on two methodologies. The first is the elliptical methodology, where the leap from univariate to multivariate has taken place by constructing density...
Persistent link: https://www.econbiz.de/10008603209
This paper provides methods for carrying out likelihood based inference for diffusion driven models, for example discretely observed multivariate diffusions, continuous time stochastic volatility models and counting process models. The diffusions can potentially be non-stationary. Although our...
Persistent link: https://www.econbiz.de/10010661411
This paper is concerned with the Bayesian estimation of non-linear stochastic differential equations when only discrete observations are available. The estimation is carried out using a tuned MCMC method, in particular a blocked Metropolis-Hastings algorithm, by introducing auxiliary points and...
Persistent link: https://www.econbiz.de/10010605114
This paper is concerned with the estimation of stochastic differential equations when only discrete observations are available. It primarily focuses on deriving a closed form solution for the one-step ahead conditional transition density using the Milstein scheme. This higher order Taylor...
Persistent link: https://www.econbiz.de/10010605298