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Estimating Discretely Observed Diffusions

  • Eckhard PlatenEmail author
  • Nicola Bruti-Liberati
Chapter
  • 4.7k Downloads
Part of the Stochastic Modelling and Applied Probability book series (SMAP, volume 64)

Abstract

In many areas of application the estimation of parameters in SDEs is an important practical task. This estimation is almost like inverting the problem of scenario simulation and can benefit from the application of Wagner-Platen expansions. We have already mentioned that it is important to apply scenario simulation when checking empirically the usefulness of a proposed estimation methods. This chapter introduces estimation techniques for discretely observed diffusion processes. Transform functions are applied to the data in order to obtain estimators of both the drift and diffusion coefficients. Consistency and asymptotic normality of the resulting estimators is investigated. Power transforms are used to estimate the parameters of affine diffusions, for which explicit estimators are obtained.

Keywords

Asset Price Estimate Function Maximum Likelihood Estimator Transition Density Conditional Moment 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2010

Authors and Affiliations

  1. 1.School of Finance and Economics, Department of Mathematical SciencesUniversity of Technology, SydneyBroadwayAustralia

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