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 AM  Vol.10 No.12 , December 2019
On the Contribution of the Stochastic Integrals to Econometrics
Abstract: The purpose of this paper is to present the theorical connection between the Itô stochastic calculus and the Financial Econometrics. This paper has two contributions. First, we give the backgrounds on how the stochastic calculus is used to model the real data with the uncertainties. Finally, by using Consumer Price Index (CPI) from the Central Bank of Congo and combining the Itô stochastic calculus and the AR (1)-GARCH (1, 1) model, we estimate the stochastic volatility of inflation rate measuring efficency of monetary policy. Thus the stochastic integrals are the powerful tools of mathematical modelling and econometric analysis.
Cite this paper: Mambo, L. , Mabela, R. , Kanyama, I. , Mbuyi, E. (2019) On the Contribution of the Stochastic Integrals to Econometrics. Applied Mathematics, 10, 1048-1070. doi: 10.4236/am.2019.1012073.
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