Parameter estimation of a bivariate diffusion process : the Heston model

The main objective of the research is to estimate the parameters on the Heston (1993) model, which models the movement of asset prices assuming that the asset price volatility is stochastic. The paper concentrates on estimating these parameters by approximating the transitional probabilities of the diffusion process with a saddlepoint distribution. By solving a system of ordinary differential equations that are in terms of the system’s cumulants, and using these solutions to calculate the saddlepoint, the transitional probabilities of the diffusion process can be approximated.

Grantor dc:publisher.institution

Department of Statistical Sciences

Year dc:date.issued

2011

Author dc:creator

• Nomoyi, Siyabulela

Advisor dc:contributor.advisor

• Varughese, Melvin

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/11774

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/11774