Introduction of the characteristic function in stochastic dynamic modelling

Abstract

The probability characteristic function is used to generalize Epste-n's stochastic dynamic prediction model. The time-differencing scheme results in an infinite system of equations which is closed by a quasi-normal procedure. This system yields an explicite approximation to the common or arbitrary marginal characteristic function, which in turn may be transformed to an estimation of the density function. The results are illustrated for Lorenz's minimum hydrodynamic equations.