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Paper No. 09-28

Download 09-28

O Papaspiliopoulos and GO Roberts

Importance sampling techniques for estimation of diffusions models

Abstract: This article develops a class of Monte Carlo (MC) methods for simulating conditioned diffusion sample paths, with special emphasis on importance sampling schemes. We restrict attention to a particular type of conditioned diffusions, the so-called diffusion bridge processes. The diffusion bridge is the process obtained by conditioning a diffusion to start and finish at specific values at two consecutive times t0 < t1.