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Back to the Future: Generating Moment Implications for Continuous-Time Markov Processes

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  • Lars Peter Hansen
  • Jose Alexandre Scheinkman

Abstract

Continuous-time Markov processes can be characterized conveniently by their infinitesimal generators. For such processes there exist forward and reverse-time generators. We show how to use these generators to construct moment conditions implied by stationary Markov processes. Generalized method of moments estimators and tests can be constructed using these moment conditions. The resulting econometric methods are designed to be applied to discrete-time data obtained by sampling continuous-time Markov processes.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0141.

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Date of creation: Sep 1993
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Publication status: published as Hansen, Lars Peter and Jose Alexandre Scheinkman. "Back To The Future: Generating Moment Implications For Continuous-Time Markov Processes," Econometrica, 1995, v63(4), 767-804.
Handle: RePEc:nbr:nberte:0141

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  1. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
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  13. Hua He., 1990. "Moment Approximation and Estimation of Diffusion Models of Asset Prices," Research Program in Finance Working Papers RPF-193, University of California at Berkeley.
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  15. repec:fth:banfra:21 is not listed on IDEAS
  16. Robinson, P M, 1976. "The Estimation of Linear Differential Equations with Constant Coefficients," Econometrica, Econometric Society, vol. 44(4), pages 751-64, July.
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  19. Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
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