Extended Kalman Filter Fong Vasicek Model

jeavom · December 8th, 2011, 1:34 pm

Hi All,I am following a paper on how to estimate the Fong Vasicek model using an Extended Kalman Filter. Link here: linkThe paper gives the maximum likelihood parameters, which includes the correlation between the two factors (p). However, in the setup of the filter this parameter does not appear to be included. How can I recover the estimate for the correlation (covariance)?Mark

jeavom · December 18th, 2011, 5:31 pm

All,I think that the answer to this is that you cannot recover the correlation using the methodology they outline. Only if you use the general form of the Extended Kalman Filter can you estimate the extra equation using a Cholesky decomposition by adding an additional state equation.I would be interested in hearing thoughts on this.Mark

sudarshankumar · December 5th, 2013, 12:17 pm

that link is not working

jeavom · December 5th, 2013, 1:05 pm

Hi,The paper was removed as it wasn't any good. I worked out how to do the EKF filter and estimate it properly and it made more sense. Thanks.Mark