Estimation of Tempered Stable Levy Models of Infinite Variation

Speaker:

Ruoting Gong, Assistant Professor, Department of Applied Mathematics, Illinois Institute of Technology

Description:

In this talk we propose a new method for the estimation of a semiparametric tempered stable Levy process. The estimation procedure combines iteratively an approximate semiparametric method of moment estimator, a Truncated Realized Quadratic Variation (TRQV), and a newly found small-time high-order approximation of the optimal threshold of the TRQV for tempered stable processes. The method is tested via simulations to estimate the volatility and the Blumenthal-Getoor index of the generalized CGMY model as well as the integrated volatility of a Heston type model with CGMY jumps. The method outperforms other efficient alternatives proposed in the literature.

This hour-long talk will be followed by a 15-minute question and answer session.

Mathematical Finance, Stochastic Analysis, and Machine Learning