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Pré-Publication, Document De Travail Année : 2009

Bayesian Estimation for Markov Modulated Asset Prices

Résumé

A Stochastic Differential Equation (SDE) appearing in mathematical finance is considered in random environment by assuming that its two parameters are switched by an unobserved continuous-time Markov chain whose states represent the states of the market environment. A Dirichlet process is placed as a prior on the space of the sample paths of this chain, leading to a hierarchical Dirichlet model whose estimation is done both on simulated data and on a real data set from the Indian market.
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Dates et versions

hal-00464386 , version 1 (26-03-2010)

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  • HAL Id : hal-00464386 , version 1

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Richard Emilion, Hafedh Faires, Srikanth K. Iyer. Bayesian Estimation for Markov Modulated Asset Prices. 2009. ⟨hal-00464386⟩
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