IDEAS home Printed from https://ideas.repec.org/a/cup/etheor/v13y1997i05p615-645_00.html
   My bibliography  Save this article

A Nonparametric Approach to the Estimation of Diffusion Processes, With an Application to a Short-Term Interest Rate Model

Author

Listed:
  • Jiang, George J.
  • Knight, John L.

Abstract

In this paper, we propose a nonparametric identification and estimation procedure for an ltd diffusion process based on discrete sampling observations. The nonparametric kernel estimator for the diffusion function developed in this paper deals with general ltd diffusion processes and avoids any functional form specification for either the drift function or the diffusion function. It is shown that under certain regularity conditions the nonparametric diffusion function estimator is pointwise consistent and asymptotically follows a normal mixture distribution. Under stronger conditions, a consistent nonparametric estimator of the drift function is also derived based on the diffusion function estimator and the marginal density of the process. An application of the nonparametric technique to a short-term interest rate model involving Canadian daily 3-month treasury bill rates is also undertaken. The estimation results provide evidence for rejecting the common parametric or semiparametric specifications for both the drift and diffusion functions.

Suggested Citation

  • Jiang, George J. & Knight, John L., 1997. "A Nonparametric Approach to the Estimation of Diffusion Processes, With an Application to a Short-Term Interest Rate Model," Econometric Theory, Cambridge University Press, vol. 13(5), pages 615-645, October.
  • Handle: RePEc:cup:etheor:v:13:y:1997:i:05:p:615-645_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0266466600006101/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:etheor:v:13:y:1997:i:05:p:615-645_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/ect .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.