Bayesian Analysis of Compound Poisson Process and its Application to Financial Data

Abstract

We consider jump diffusion processes with compound Poisson process whose jump range has normal distribution or double exponential distribution and also their Bernoulli approximations. In this paper, we shall estimate the parameters of these models by using MCMC-based Bayes formula. As an application, we shall make model selection with respect to Nikkei financial data in virtue of the EIC-criterion.