Conditional estimation of diffusion processes

• 成果类型: Article
• 署名作者: Li, MQ; Pearson, ND; Poteshman, AM
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2004.03.001
• 发表日期: 2004
• 页码: 31-66
• 关键词: estimation; Diffusion process; Interest rates; nonlinearity

摘要

There are a number of circumstances in finance in which it is useful to estimate diffusion processes conditional on some event. In this paper, we develop the theoretical and numerical tools necessary to perform conditional estimation of diffusion processes within a generalized method of moments framework. We illustrate our method by estimating a univariate diffusion process for a standard time-series of interest rate data conditioned to remain between lower and upper boundaries. A test statistic fails to reject by a wide margin the linearity of the conditionally estimated drift coefficient. (C) 2004 Elsevier B.V. All rights reserved.