Linear-Quadratic Jump-Diffusion Modelling with Application to Stochastic Volatility

2003 ◽  
Author(s):  
Peng NMI1 Cheng ◽  
O. Scaillet
Keyword(s):  
Stochastic Volatility ◽  
Jump Diffusion ◽  
Linear Quadratic ◽  
Diffusion Modelling

scholarly journals LINEAR-QUADRATIC JUMP-DIFFUSION MODELING

2007 ◽  
Vol 17 (4) ◽  
pp. 575-598 ◽  
Author(s):  
Peng Cheng ◽  
Olivier Scaillet
Keyword(s):  
Jump Diffusion ◽  
Diffusion Modeling ◽  
Linear Quadratic

scholarly journals Locally Scaled and Stochastic Volatility Metropolis– Hastings Algorithms

Algorithms ◽  
2021 ◽  
Vol 14 (12) ◽  
pp. 351
Author(s):  
Wilson Tsakane Mongwe ◽  
Rendani Mbuvha ◽  
Tshilidzi Marwala
Keyword(s):  
Monte Carlo ◽  
Sample Size ◽  
Stochastic Volatility ◽  
Diffusion Processes ◽  
Predictive Performance ◽  
Jump Diffusion ◽  
Effective Sample Size ◽  
Jump Diffusion Processes ◽  
Current State ◽  
Mh Algorithm

Markov chain Monte Carlo (MCMC) techniques are usually used to infer model parameters when closed-form inference is not feasible, with one of the simplest MCMC methods being the random walk Metropolis–Hastings (MH) algorithm. The MH algorithm suffers from random walk behaviour, which results in inefficient exploration of the target posterior distribution. This method has been improved upon, with algorithms such as Metropolis Adjusted Langevin Monte Carlo (MALA) and Hamiltonian Monte Carlo being examples of popular modifications to MH. In this work, we revisit the MH algorithm to reduce the autocorrelations in the generated samples without adding significant computational time. We present the: (1) Stochastic Volatility Metropolis–Hastings (SVMH) algorithm, which is based on using a random scaling matrix in the MH algorithm, and (2) Locally Scaled Metropolis–Hastings (LSMH) algorithm, in which the scaled matrix depends on the local geometry of the target distribution. For both these algorithms, the proposal distribution is still Gaussian centred at the current state. The empirical results show that these minor additions to the MH algorithm significantly improve the effective sample rates and predictive performance over the vanilla MH method. The SVMH algorithm produces similar effective sample sizes to the LSMH method, with SVMH outperforming LSMH on an execution time normalised effective sample size basis. The performance of the proposed methods is also compared to the MALA and the current state-of-art method being the No-U-Turn sampler (NUTS). The analysis is performed using a simulation study based on Neal’s funnel and multivariate Gaussian distributions and using real world data modeled using jump diffusion processes and Bayesian logistic regression. Although both MALA and NUTS outperform the proposed algorithms on an effective sample size basis, the SVMH algorithm has similar or better predictive performance when compared to MALA and NUTS across the various targets. In addition, the SVMH algorithm outperforms the other MCMC algorithms on a normalised effective sample size basis on the jump diffusion processes datasets. These results indicate the overall usefulness of the proposed algorithms.

Sign in / Sign up

Export Citation Format

Share Document