Simulation and Estimation of General Tempered Lévy Distributions

• Applicant: Dr. Till Massing
• Subject Area: Statistics and Econometrics ; Mathematics
• Term: since 2020
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 455257011

This project aims to study simulation and estimation methods for tempered stable distributions. Tempered stable distributions are frequently used in modelling price processes of financial instruments and option pricing. However, established estimation methods lack either numerical or statistical efficiency. To address this, a new estimation procedure will be developed which is based on the generalized-method-of-moments-approach. The project consists of three parts. In the first part, we will study the statistical properties of the new estimator. Based upon which we will enhance models for electricity spot prices frequently used in the literature. In the second part of the project, we will analyze the estimator’s properties when applied to high-frequency data and aim to prove local asymptotic normality. Finally, we will extend the class of admissible distributions to generalized tempered distributions using a simulation algorithm based on new series representations and establish a semiparametric estimation procedure. These results will be used in extending the model for electricity spot prices and improving the valuation of futures.

• DFG Programme: Research Grants
• International Connection: Norway
• Cooperation Partner: Professor Dr. Fred Espen Benth
• Co-Investigators: Professor Dr. Denis Belomestny; Professor Dr. Rüdiger Kiesel