Vasicek model estimation via linear regression
Hi, I have to check mean reversion with a Vasicek model for a time series. As you certainly know Vasicek process is discribed by following formula: dXt = a(b-Xt)dt + sdWt (1) http://en.wikipedia.org/wiki/Vasicek_model To estimate the parameters in my data I can use this expression: Xt - Xt-1 = a(b-Xt-1)Dt + se (2) where: Xt: time series at time t Xt-1: time series at time t-1 a: unknown parameter b: unknown parameter Dt: in my case I can assimilate it = 1 S: standard deviation e: error ~N(0,1) Basically, I want to estimate unknown parameters a and b using a linear regression. Usually I work on linear regression with lm() function but I don't undertand how formulate my (2) model in to lm command. Can anyone give me some suggestions? Thanks in advance. Regards, Marco ____________________________________________________________ FREE 3D EARTH SCREENSAVER - Watch the Earth right on your desktop!