However, the problems in estimating such models are barely discussed there. It turns out that, at least for some of these models, the covariance structure may be simplified substantially by performing a simple integral wavelet transform, namely the Haar transform. The Haar wavelets also result in a natural sampling procedure. A fractional Brownian motion with drift is a special case. These are important examples of applications in asset pricing and the term structure of interest rates.
Computation is simplified in consequence of using wavelet transforms.
Paper provided by Society for Computational Economics in its series Computing in Economics and Finance '99 with number 1242. If you experience problems downloading a file check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. Please be patient as the files may be large.