Modelling the Stochastic Correlation

University essay from KTH/Matematisk statistik

Author: Peng Chen; [2016]

Keywords: ;


In this thesis, we mainly study the correlation between stocks. The correlation between stocks has been receiving increasing attention. Usually the correlation is considered to be a constant, although it is observed to be varying over time. In this thesis, we study the properties of correlations between Wiener processes and introduce a stochastic correlation model. Following the calibration methods by Zetocha, we implement the calibration for a new set of market data.

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