Nonparametric estimation of diffusion process: a closer look
AbstractA Monte Carlo simulation is performed to investigate the finite sample properties of a nonparametric estimator, based on discretely sampled observations of continuous-time Ito diffusion process. Chapman and Pearson (2000) studies finite-sample properties of the nonparametric estimator of Aýt-Sahalia (1996) and Stanton (1997) and they find that nonlinearity of the short rate drift is not a robust stylized fact but it’s an artifacts of the estimation procedure. This paper examine the finite sample properties of a different nonparametric estimator within the Stanton (1997)’s framework.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0504016.
Length: 17 pages
Date of creation: 19 Apr 2005
Date of revision:
Note: Type of Document - pdf; pages: 17
Contact details of provider:
Web page: http://188.8.131.52
Find related papers by JEL classification:
- G - Financial Economics
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew W. Lo & Jiang Wang, 1994.
"Implementing Option Pricing Models When Asset Returns Are Predictable,"
NBER Working Papers
4720, National Bureau of Economic Research, Inc.
- Lo, Andrew W & Wang, Jiang, 1995. " Implementing Option Pricing Models When Asset Returns Are Predictable," Journal of Finance, American Finance Association, vol. 50(1), pages 87-129, March.
- Lo, Andrew W. (Andrew Wen-Chuan) & Wang, Jiang, 1959-, 1993. "Implementing option pricing models when asset returns are predictable," Working papers 3593-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Ait-Sahalia, Yacine, 1996.
"Nonparametric Pricing of Interest Rate Derivative Securities,"
Econometric Society, vol. 64(3), pages 527-60, May.
- Yacine Ait-Sahalia, 1995. "Nonparametric Pricing of Interest Rate Derivative Securities," NBER Working Papers 5345, National Bureau of Economic Research, Inc.
- Phillips, P. C. B., 1973. "The problem of identification in finite parameter continuous time models," Journal of Econometrics, Elsevier, vol. 1(4), pages 351-362, December.
- Merton, Robert C., 1980.
"On estimating the expected return on the market : An exploratory investigation,"
Journal of Financial Economics,
Elsevier, vol. 8(4), pages 323-361, December.
- Robert C. Merton, 1980. "On Estimating the Expected Return on the Market: An Exploratory Investigation," NBER Working Papers 0444, National Bureau of Economic Research, Inc.
- David A. Chapman & Neil D. Pearson, 1998.
"Is the Short Rate Drift Actually Nonlinear?,"
- Duffie, Darrell & Singleton, Kenneth J, 1993. "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica, Econometric Society, vol. 61(4), pages 929-52, July.
- Lo, Andrew W., 1988.
"Maximum Likelihood Estimation of Generalized Itô Processes with Discretely Sampled Data,"
Cambridge University Press, vol. 4(02), pages 231-247, August.
- Andrew W. Lo, 1986. "Maximum Likelihood Estimation of Generalized Ito Processes with Discretely Sampled Data," NBER Technical Working Papers 0059, National Bureau of Economic Research, Inc.
- Andrew W. Lo, . "Maximum Likelihood Estimation of Generalized Ito Processes with Discretely Sampled Data," Rodney L. White Center for Financial Research Working Papers 15-86, Wharton School Rodney L. White Center for Financial Research.
- Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
- Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
- Courtadon, Georges, 1982. "The Pricing of Options on Default-Free Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(01), pages 75-100, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.