Two-dimensional Hull-White model for stochastic volatility and its nonlinear filtering estimation | Zendy

Budhi Surya | Zendy

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Two-dimensional Hull-White model for stochastic volatility and its nonlinear filtering estimation

Author(s) -

Budhi Surya

Publication year - 2011

Publication title -

procedia computer science

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.334

H-Index - 76

ISSN - 1877-0509

DOI - 10.1016/j.procs.2011.04.154

Subject(s) - computer science , hull , nonlinear system , volatility (finance) , stochastic volatility , estimation , algorithm , mathematical optimization , econometrics , mathematics , geology , physics , management , quantum mechanics , economics , oceanography

This paper presents an extension of the Hull-White model for stochastic volatility. It considers a two-dimensional case where returns of two assets are correlated. The main objective is to estimate the volatility of each asset online given the observation of the returns of the asset prices, taking account the correlation between the asset prices. We propose recursive filtering equations derived from the results of Jazwinski [8] and Maybeck [12] for the estimation

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