Sequential Bayesian Learning for Merton's Jump Model with Stochastic   Volatility
  Jump stochastic volatility models are central to financial econometrics for volatility forecasting, portfolio risk management, and derivatives pricing. Markov Chain Monte Carlo (MCMC) algorithms are computationally unfeasible for the sequential learning of volatility state variables and parameters, whereby the investor must update all posterior and predictive densities as new information arrives. We develop a particle filtering and learning algorithm to sample posterior distribution in Merton's jump stochastic volatility. This allows to filter spot volatilities and jump times, together with sequentially updating (learning) of jump and volatility parameters. We illustrate our methodology on Google's stock return. We conclude with directions for future research. 
Eric Jacquier and Nicholas Polson and Vadim Sokolov
stat.AP