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Semiparametric estimation of locally stationary diffusion models

Koo, Bonsoo and Linton, Oliver (2010) Semiparametric estimation of locally stationary diffusion models. Econometrics (EM/2010/551). Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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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. We propose estimators of all the unknown quantities based on long span data. Our estimation method makes use of the local stationarity. We establish asymptotic theory for the proposed estimators as the time span increases. We apply this method to the real financial data to illustrate the validity of our model. Finally, we present a simulation study to provide the finitesample performance of the proposed estimators.

Item Type: Monograph (Report)
Official URL: http://sticerd.lse.ac.uk/
Additional Information: © 2010 The Authors
Divisions: STICERD
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 23 Jul 2014 15:33
Last Modified: 14 Jun 2020 23:27
Funders: European Research Council, Universidad Carlos III de Madrid-Banco Santander Chair of Excellence
URI: http://eprints.lse.ac.uk/id/eprint/58186

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