Abstract
The Kalman filter is proposed as a method for estimating the value of nontrading securities during periods when other securities are trading. The method also provides confidence intervals that indicate the degree of uncertainty regarding estimated value. The method is applied to the Major Market Index during the principal days of the 1987 stock market crash. Our results indicate that nonsynchronous trading explains a small but significant portion of the cash-futures spread that prevailed during these days.
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Bassett, G.W., France, V.G. & Pliska, S.R. Kalman filter estimation for valuing nontrading securities, with applications to the MMI cash-future spread on October 19 and 20, 1987. Rev Quant Finan Acc 1, 135–151 (1991). https://doi.org/10.1007/BF02409668
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DOI: https://doi.org/10.1007/BF02409668