Jump Processes and Special Problems
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* Identify the evolutionary structure of the underlying process
* Find an appropriate mathematical characterization that formulates such evolution and
* Construct the model in terms of the disposable information (usually time series). In this chapter we shall be concerned with a number of approaches and processes which depart from the basic random walk models considered earlier. Some of these models have still the Markov property such as jump processes as well as processes with absorption and reflection boundaries. Other models, such as nonlinear stochastic models are far more difficult to deal with, although they are an essential part of real phenomena. Such models are discussed in the next chapter however. As with the previous chapters, we emphasize again many applications in finance, insurance and risk.
KeywordsRandom Walk Poisson Process Wiener Process Price Process Jump Process
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