1st Edition

Pathwise Estimation and Inference for Diffusion Market Models





ISBN 9780367731212
Published December 18, 2020 by Chapman and Hall/CRC
238 Pages

USD $54.95

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Book Description

Pathwise estimation and inference for diffusion market models discusses contemporary techniques for inferring, from options and bond prices, the market participants' aggregate view on important financial parameters such as implied volatility, discount rate, future interest rate, and their uncertainty thereof. The focus is on the pathwise inference methods that are applicable to a sole path of the observed prices and do not require the observation of an ensemble of such paths.





This book is pitched at the level of senior undergraduate students undertaking research at honors year, and postgraduate candidates undertaking Master’s or PhD degree by research. From a research perspective, this book reaches out to academic researchers from backgrounds as diverse as mathematics and probability, econometrics and statistics, and computational mathematics and optimization whose interest lie in analysis and modelling of financial market data from a multi-disciplinary approach. Additionally, this book is also aimed at financial market practitioners participating in capital market facing businesses who seek to keep abreast with and draw inspiration from novel approaches in market data analysis.



The first two chapters of the book contains introductory material on stochastic analysis and the classical diffusion stock market models. The remaining chapters discuss more special stock and bond market models and special methods of pathwise inference for market parameter for different models. The final chapter describes applications of numerical methods of inference of bond market parameters to forecasting of short rate.







Nikolai Dokuchaev is an associate professor in Mathematics and Statistics at Curtin University. His research interests include mathematical and statistical finance, stochastic analysis, PDEs, control, and signal processing.





Lin Yee Hin is a practitioner in the capital market facing industry. His research interests include econometrics, non-parametric regression, and scientific computing.

Table of Contents

1. Introduction. 2. Background of Stochastic Analysis. 3. The Diffusion Market Model. 4. Some Special Market Models. 5. Statistical Inference from Historical Data. 6. Models for Bond Prices. 7. Review of Methods of Inverse Inference from Observed Prices. 8. Implied Volatility and Risk-Free Rate: Basic Facts. 9. Inference of Implied Parameters from Underdefined Systems. 10. Inference of Implied Parameters from Overdefined Systems. 11. Forecast of Short Rate Based on the CIR Model.

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Author(s)

Biography

Nikolai Dokuchaev is an associate professor in Mathematics and Statistics at Curtin University. His research interests include mathematical and statistical finance, stochastic analysis, PDEs, control, and signal processing.



Lin Yee Hin is a practitioner in the capital market facing industry. His research interests include econometrics, non-parametric regression, and scientific computing.