<t>The problem is with what the kalman filter does. It takes a 2 equation system of:z(t) = a r(t) + er(t+1) = b r(t) +uWhere we can't actually observe r. all we have the z's. So, if we give r some intitial value r0, it will project z onto that r0 and then re-predict r0 in order to minimize the varia...

<t>Hi, I'm trying to estimate the single factor model along the lines of David Bolder's Affine Term Structure ... paper for the Bank of Canada. I've done a relatively extensive literature review including reading hamilton and Canova. The issue I'm having is that most people spend a lot time talking ...

<t>Does anyone know of a beginners guide to setting up or solving the problem:argmin Sum( (Cstar - Cobs)^2)(theta)where Cstar is estimated and Cobs observed option prices. I'm having a bit of a problem on how you actually input estimated option prices in order to solve for the parameters. I have a n...

<t>Start with Marno Verbeek's A Guide to Modern Econometrics.It's quicker and faster than basic intro books, but gives great intuitive and mathematical explanations over everything from the Gauss-Markov Assumptions up through Co-integration and Vector Error Correction Models (VAR's that deal with co...

<t>If you wanted to make up and model a Collateralized ____ Obligation that was based on options where payouts were based on selling options and notional loss amounts where taken from options that ended up in the money. How would you model the corr of such a product in order to price it given, say, ...

Thanks for the advice. I'll definitely have to think about this stuff some more. d, can you post the name of the paper because that link is dead. Also, is there a baseline approach to calibration that you would compare these to.thanks again, keith

<t>Hi, I'm trying to get my PhD going by writing about differing approaches to calibrating and pricing options with Levy processes.I'm currently working with the variance gamma approach and the non-parametric approach of Tankov and Cont. Can anyone speak to the relative desirability of either approa...