Title of article :
Estimation of semiparametric locally stationary diffusion models
Author/Authors :
Koo، نويسنده , , Bonsoo and Linton، نويسنده , , Oliver، نويسنده ,
Issue Information :
دوفصلنامه با شماره پیاپی سال 2012
Pages :
24
From page :
210
To page :
233
Abstract :
This paper proposes a class of locally stationary diffusion processes. The model has a time varying but locally linear drift and a volatility coefficient that is allowed to vary over time and space. The model is semiparametric because we allow these functions to be unknown and the innovation process is parametrically specified, indeed completely known. We propose estimators of all the unknown quantities based on long span data. Our estimation method makes use of the property of local stationarity. We establish asymptotic theory for the proposed estimators as the time span increases, so we do not rely on infill asymptotics. We apply this method to interest rate data to illustrate the validity of our model. Finally, we present a simulation study to provide the finite-sample performance of the proposed estimators.
Keywords :
Diffusion processes , local stationarity , Term structure dynamics , Density matching , Derivative pricing
Journal title :
Journal of Econometrics
Serial Year :
2012
Journal title :
Journal of Econometrics
Record number :
2129121
Link To Document :
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