Résumé
We introduce a mean-reverting SDE whose solution is naturally defined on the space of correlation matrices. This SDE can be seen as an extension of the well-known Wright-Fisher diffusion. We provide conditions that ensure weak and strong uniqueness of the SDE, and describe its ergodic limit. We also shed light on a useful connection with Wishart processes that makes understand how we get the full SDE. Then, we focus on the simulation of this diffusion and present discretization schemes that achieve a second-order weak convergence. Last, we give a possible application of these processes in finance and argue that they could easily replace and improve the standard assumption of a constant correlation.
| langue originale | Anglais |
|---|---|
| Pages (de - à) | 1472-1520 |
| Nombre de pages | 49 |
| journal | Stochastic Processes and their Applications |
| Volume | 123 |
| Numéro de publication | 4 |
| Les DOIs | |
| état | Publié - 21 janv. 2013 |
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