2017/05/13 by Stavros J. Sioutis, Sioutis, Stavros J.
Economics, Econometrics and Finance · Social Sciences · #FOS: Economics and business #Financial Risk and Volatility Modeling #Insurance, Mortality, Demography, Risk Management #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications #q-fin.PR
paper · pdf · doi:10.48550/arxiv.1705.04780
49 pages, 8 figures
arxiv created 2017/05/13 · openalex publication_date 2017/05/13 · arxiv updated 2017/05/16 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
The accuracy of least squares calibration using option premiums and particle filtering of price data to find model parameters is determined. Derivative models using exponential Lévy processes are calibrated using regularized weighted least squares with respect to the minimal entropy martingale measure. Sequential importance resampling is used for the Bayesian inference problem of time series parameter estimation with proposal distribution determined using extended Kalman filter. The algorithms converge to their respective global optima using a highly parallelizable statistical optimization approach using a grid of initial positions. Each of these methods should produce the same parameters. We investigate this assertion.