Stochastic Volatility Jump Diffusion Model : Real World Calibration
Document ID: 2008-1222 (previously 2008/011)
Published on: 28th November 2008
Author: Nick Jessop
This note describes the Barrie & Hibbert ESG equity model, reviews our real world equity calibration targets, and describes how we use them to construct a model calibration for real world scenario projections which utilises the Stochastic Volatility Jump Diffusion (SVJD) model. The calibration of the model are based on estimates for model parameters derived from historical data, unconditional correlation targets as well as targets set out for conditional and unconditional volatility levels.
