Modeling Financial Time Series Through Second Order Stochastic Differential Equations

Resumo / Abstract:

We discuss the use of second order stochastic differential equations in economics and finance. We show that second order stochastic differential equations are the right model in continuous-time to account for integrated processes that can be made stationary by differencing. We provide an empirical illustration and discuss a second order stochastic differential equation for stock prices and exchange rates.

Outros seminários / Other seminars: Programa completo / Full programme.