Title :
Hidden Markov filtering for a mean reverting interest rate model
Author :
Elliot, R. ; Fischer, P. ; Platen, E.
Author_Institution :
Dept. of Appl. Math., Adelaide Univ., SA, Australia
Abstract :
A hidden Markov model with mean reverting characteristics is considered as a model for financial time series, particularly interest rates. The optimal filter for the state of the hidden Markov chain is obtained. A number of auxiliary filters are obtained that enable the parameters of the model to be estimated using the EM algorithm. A simulation study demonstrates the feasibility of this approach
Keywords :
economic cybernetics; finance; hidden Markov models; parameter estimation; time series; financial time series; hidden Markov filtering; hidden Markov model; mean reverting interest rate model; optimal filter; parameter estimation; simulation; Diffusion processes; Economic indicators; Equations; Filtering; Filters; Hidden Markov models; Mathematical model; Mathematics; Space technology; State-space methods;
Conference_Titel :
Decision and Control, 1999. Proceedings of the 38th IEEE Conference on
Conference_Location :
Phoenix, AZ
Print_ISBN :
0-7803-5250-5
DOI :
10.1109/CDC.1999.831354
