Conditional estimation of diffusion processes

被引:20
作者
Li, MQ [1 ]
Pearson, ND [1 ]
Poteshman, AM [1 ]
机构
[1] Univ Illinois, Champaign, IL 61820 USA
关键词
estimation; diffusion process; interest rates; nonlinearity;
D O I
10.1016/j.jfineco.2004.03.001
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
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.
引用
收藏
页码:31 / 66
页数:36
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