Adaptive filtering for stochastic risk premia in bond market

ShinIchi Aihara, Arunabha Bagchi

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    We consider the adaptive filtering problem for estimating the randomly changing risk premium and its system parameters for zero-coupon bond models. The term structure model for a zero-coupon bond is formulated including the stochastic risk-premium factor. We specify our observation data from the yield curve and bond data which are used to hedge some option claims. For the xed system parameters, the Kalman filter for the risk-premium and the factor process is constructed first. Secondly, by using the parallel filtering technique and resampling technique commonly used in particle filters, the on-line estimation algorithm for model parameters is constructed. Some simulation studies are nally presented.
    Original languageUndefined
    Pages (from-to)2203-2214
    Number of pages12
    JournalInternational journal of innovative computing, information and control
    Issue number3(B)
    Publication statusPublished - Mar 2012


    • Adaptive parameter estimation
    • IR-84150
    • Stochastic risk premium
    • Term structure model
    • METIS-296188
    • Bond market
    • EWI-22767
    • Kalman filter

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