Non-Gaussian OU based
models and some of their uses in financial economics
Ole Barndorff-Nielsen, Neil Shephard
Journal of the Royal Statistical Society, Series B, 63, 2001, 167-241
Abstract
Non-Gaussian processes of Ornstein-Uhlenbeck type, or OU
processes for short, offer the possibility of capturing important
distributional deviations from Gaussianity and for flexible modelling of
dependence structures. This paper develops this potential, drawing on and
extending powerful results from probability theory for applications in
statistical analysis. Their power is illustrated by a sustained
application of OU processes within the context of finance and
econometrics. We construct continuous time stochastic volatility models
for financial assets where the volatility processes are superpositions of
positive OU processes, and we study these models in relation to financial
data and theory.
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