Hi Julie,

Sorry for the delay but the end of the year is always filled with a lot of task. I wrote a separate article about the calibration: http://wp.me/p1gkpt-cf

Hope it helps and it is not so late.

Regards,

Pavel

Thank you for this great article.

I wonder what would be an ideal solution for the calibration of this process? I tried the method from your other link but got stuck at deciding the volatility sigma. As can be seen from the above equation, we have 0.5*sigma^2*dt and another one which is sigma*sqrt(dt). If we use OLS, would the constant (intercept) = 0.5*sigma^2 and sde = sigma*sqrt(dt)? Hence which one we use for estimating the sigma of the process?

Many thanks.

Kind regards,

Julie