Application of Iterated Filtering for Parametric Estimation of Instantaneous Variance in the Case of Non-Gaussian Ornstein-Uhlenbeck Stochastic Volatility Processes

Piotr Szczepocki

doi:10.5604/01.3001.0013.8364

Piotr Szczepocki Uniwersytet Łódzki, Wydział Ekonomiczno-Socjologiczny, Katedra Metod Statystycznych ORCID:https://orcid.org/0000-0001-8377-3831 Przegląd Statystyczny. Statistical Review, vol. 66, 2019, 1, pages: 51-68 Published online: 28 May 2019 DOI 10.5604/01.3001.0013.8364

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ARTICLE

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ABSTRACT

The article presents a method for parametric estimation of instantaneous variance in the case of non-Gaussian Ornstein-Uhlenbeck stochastic volatility process by means of the iterated filtering and realized variance estimator. The method is applied to realized variance of S&P500 index data. Empirical application is accompanied with simulation study to examine performance of the estimation technique.

KEYWORDS

stochastic volatility, Ornstein-Uhlenbeck process, iterated filtering

JEL

C51, C58

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