We quantify the effects on contingent claim valuation of using an estimator for the volatility of a geometric Brownian motion (GBM) process. That is, we show what difficulties can arise when failing to account for estimation risk. Our working problem uses a direct estimator of volatility based...

This paper presents the construction of a particle filter, which incorporates elements inspired by genetic algorithms, in order to achieve accelerated adaptation of the estimated posterior distribution to changes in model parameters. Specifically, the filter is designed for the situation where...