Questions tagged [stochastic-processes]
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questions with no upvoted or accepted answers
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Stochastic Dynamic Programming: Deriving the Steady-State for a Lottery
I am working through the basic examples of the stochastic RBC models in the book by McCandless (2008): The ABCs of RBCs, pp. 71 - 75
A Standard Stochastic Dynamic Programming Problem
Here is a ...
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0answers
29 views
Generalization of Tauchen 1986 approach to a case of time-varying volatility
My question is about generalization of Tauchen'86 approach to a case of time-varying volatility.
Say, I have a process $$z_{t+1}=\rho z_t+\sigma_t \varepsilon_{t+1}$$ where $\varepsilon\sim \mathcal{...
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85 views
How to use the Girsanov theorem to prove $\hat{W_t}$ is a $\hat{\mathbb P}$-Brownian motion?
Let $T > 0$, and let $(\Omega, \mathscr F, \{\mathscr F_t\}_{t \in [0,T]}, \mathbb P)$ be a filtered probability space where $\mathbb P = \tilde{\mathbb P}$ (risk-neutral measure) and $\mathscr F_t ...
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Arbitrage checking (one step price tree)
I have a questions on arbitrage. These questions are from my lecture notes. And I don’t understand their some points.
Ex1: there is a single step market as follows
here, there are two securities ...
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1answer
106 views
Stochastic process difference equation: stationary distribution
How can I find the stationary distribution (as t goes to infinity) of stochastic difference equations in the form:
$x_{t+1} = a*x_t + b*N(0,1)$
where N(0,1) is a standard normal pdf
I have ...
