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Explicit Solution of a Non-Linear Filtering Problem for Lévy Processes with Application to Finance

Explicit Solution of a Non-Linear Filtering Problem for Lévy Processes with Application to Finance In this paper we explicitly solve a non-linear filtering problem with mixed observations, modelled by a Brownian motion and a generalized Cox process, whose jump intensity is given in terms of a Lévy measure. Motivated by empirical observations of R. Cont and P. Tankov we propose a model for financial assets, which captures the phenomenon of time inhomogeneity of the jump size density. We apply the explicit formula to obtain the optimal filter for the corresponding filtering problem. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Mathematics and Optimization Springer Journals

Explicit Solution of a Non-Linear Filtering Problem for Lévy Processes with Application to Finance

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References (28)

Publisher
Springer Journals
Copyright
Copyright © 2004 by Springer-Verlag
Subject
Philosophy
ISSN
0095-4616
eISSN
1432-0606
DOI
10.1007/s00245-004-0798-6
Publisher site
See Article on Publisher Site

Abstract

In this paper we explicitly solve a non-linear filtering problem with mixed observations, modelled by a Brownian motion and a generalized Cox process, whose jump intensity is given in terms of a Lévy measure. Motivated by empirical observations of R. Cont and P. Tankov we propose a model for financial assets, which captures the phenomenon of time inhomogeneity of the jump size density. We apply the explicit formula to obtain the optimal filter for the corresponding filtering problem.

Journal

Applied Mathematics and OptimizationSpringer Journals

Published: Aug 1, 2004

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