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Appendix
Gibbs sampling of Geman and Geman (1984) and Gelfand and Smith (1990) is one of the most
popular MCMC method. It is a special case of Metropolis-Hastings algorithm. The point of Gibbs 433
sampling is that given a multivariate distribution, it can sample from a conditional distribution
then to integrate over a joint distribution. For the simulation in Markov Chain, the procedures of
Gibbs sampling are comprised of two main steps.
If there is a sequence data Y^ 0 ; Y^ 1 ; Y^ 2 ; :::; Y^ n missing Y^ i and

d Y^ ¼ mðY Þdt þ sðY ÞdW : ðA1Þ

The conditional density is defined by:
   
p Y^ i jY^ \ i ; u / p Y^ i jY^ i21 ; Y^ iþ1 ; u ðA2Þ

where:
 
1=2 22 1=2
p Y^ i jY^ i21 ; Y^ iþ1 ; u ¼ js22
i21 j jsi j

  
1 ^ 21 21=2 2 1  ^ 
21 21=2 2
£ exp 2 k DYi 2 mi21 Dt si21 ðDtÞ k 2 k DYiþ1 2 mi Dt si ðDt Þ k
2 2
Set q (ŶijŶi2 1, Ŷiþ 1, u) A N(12 (Ŷi2 1, Ŷiþ 1), 12 s 2i Dt), now we get c which is defined by:
 
p Y^ i jY^ i21 ; Y^ iþ1 ; u
c¼  : ðA3Þ
q Y^ i jY^ i21 ; Y^ iþ1 ; u

Using the Hybrid Accept/Reject Metropolis-Hastings Algorithm, we make the choice of missing
data Y^ i by the known joint conditional density.

Corresponding author
Eddie Hui can be contacted at: bscmhui@inet.polyu.edu.hk

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