Approximate Transition Density Estimation of the Stochastic Cusp Model
Identifikátory výsledku
Kód výsledku v IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F16%3A10329834" target="_blank" >RIV/00216208:11320/16:10329834 - isvavai.cz</a>
Nalezeny alternativní kódy
RIV/67985556:_____/16:00507383
Výsledek na webu
<a href="http://mme2016.tul.cz/conferenceproceedings/mme2016_conference_proceedings.pdf" target="_blank" >http://mme2016.tul.cz/conferenceproceedings/mme2016_conference_proceedings.pdf</a>
DOI - Digital Object Identifier
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Alternativní jazyky
Jazyk výsledku
angličtina
Název v původním jazyce
Approximate Transition Density Estimation of the Stochastic Cusp Model
Popis výsledku v původním jazyce
Stochastic cusp model is defined by stochastic differential equation with cubic drift. Its stationary density allows for skewness, different tail shapes and bimodality. There are two stable equilibria in bimodality case and movement from one equilibrium to another is interpreted as a crash. Qualitative properties of the cusp model were employed to model crashes on financial markets, however, practical applications of the model employed the stationary distribution, which does not take into account the serial dependence between observations. Because closed-form solution of the transition density is not known, one has to use approximate technique to estimate transition density. This paper extends approximate maximum likelihood method, which relies on the closed-form expansion of the transition density, to incorporate time-varying parameters of the drift function to be driven by market fundamentals. A measure to predict endogenous crashes of the model is proposed using transition density estimates. Empirical example estimates Iceland Krona depreciation with respect to the British Pound in the year 2001 using differential of interbank interest rates as a market fundamental.
Název v anglickém jazyce
Approximate Transition Density Estimation of the Stochastic Cusp Model
Popis výsledku anglicky
Stochastic cusp model is defined by stochastic differential equation with cubic drift. Its stationary density allows for skewness, different tail shapes and bimodality. There are two stable equilibria in bimodality case and movement from one equilibrium to another is interpreted as a crash. Qualitative properties of the cusp model were employed to model crashes on financial markets, however, practical applications of the model employed the stationary distribution, which does not take into account the serial dependence between observations. Because closed-form solution of the transition density is not known, one has to use approximate technique to estimate transition density. This paper extends approximate maximum likelihood method, which relies on the closed-form expansion of the transition density, to incorporate time-varying parameters of the drift function to be driven by market fundamentals. A measure to predict endogenous crashes of the model is proposed using transition density estimates. Empirical example estimates Iceland Krona depreciation with respect to the British Pound in the year 2001 using differential of interbank interest rates as a market fundamental.
Klasifikace
Druh
D - Stať ve sborníku
CEP obor
BA - Obecná matematika
OECD FORD obor
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Návaznosti výsledku
Projekt
<a href="/cs/project/GBP402%2F12%2FG097" target="_blank" >GBP402/12/G097: DYME-Dynamické modely v ekonomii</a><br>
Návaznosti
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Ostatní
Rok uplatnění
2016
Kód důvěrnosti údajů
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Údaje specifické pro druh výsledku
Název statě ve sborníku
34TH INTERNATIONAL CONFERENCE MATHEMATICAL METHODS IN ECONOMICS (MME 2016)
ISBN
978-80-7494-296-9
ISSN
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e-ISSN
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Počet stran výsledku
6
Strana od-do
892-897
Název nakladatele
TECHNICAL UNIVERSITY LIBEREC
Místo vydání
LIBEREC
Místo konání akce
Liberec
Datum konání akce
6. 9. 2016
Typ akce podle státní příslušnosti
WRD - Celosvětová akce
Kód UT WoS článku
000385239500153