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2 edition of Testing the parametric specification of the diffusion function in a diffusion process found in the catalog.

Testing the parametric specification of the diffusion function in a diffusion process

Fuchun Li

Testing the parametric specification of the diffusion function in a diffusion process

by Fuchun Li

  • 199 Want to read
  • 9 Currently reading

Published by Bank of Canada in Ottawa .
Written in English

    Subjects:
  • Diffusion processes.

  • Edition Notes

    Statementby Fuchun Li.
    SeriesBank of Canada working paper -- 2005-35, Working paper (Bank of Canada) -- 2005-35.
    ContributionsBank of Canada.
    The Physical Object
    Paginationv, 43 p. ;
    Number of Pages43
    ID Numbers
    Open LibraryOL19474765M

    X t is an NVars-by-1 state vector of process variables. (non-time-varying) parametric specification. This array fully captures all implementation details, which are clearly associated with a parametric form. , callable as a function of time and state. Diffusion — Composite diffusion-rate function. Further, to infer the implied diffusion process, he (b) nonparametrically estimates the marginal density function of the short rate. Since the stochastic process of the short rate is fully recovered from the data without any parametric restrictions, the specification test of alternative parametric models is .

    This parametric design video is about reaction-diffusion. Reaction-diffusion (RD) is a canonical example of complex behavior that emerges from a simple set of rules. RD models a set of substances that are diffusing, or spreading; these substances also react with one another to create new substances. Abstract. We develop a specification test for the transition density of a discretely sampled continuous-time jump-diffusion process, based on a comparison of a nonparametric estimate of the transition density or distribution function with their corresponding parametric .

    Testing the Parametric Specification of the Diffusion Function in a Diffusion Process by Fuchun Li; Measuring Systemic Importance of Financial Institutions: An Extreme Value Theory Approach by Toni Gravelle & Fuchun Li; TESTING THE PARAMETRIC SPECIFICATION OF THE DIFFUSION FUNCTION IN A DIFFUSION PROCESS by Li, Fuchun. X t is an NVars-by-1 state vector of process variables.. μ is an NVars-by-1 drift-rate vector.. V is an NVars-by-NBrowns instantaneous volatility rate matrix.. dW t is an NBrowns-by-1 vector of (possibly) correlated zero-drift/unit-variance rate Brownian components.


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Testing the parametric specification of the diffusion function in a diffusion process by Fuchun Li Download PDF EPUB FB2

Monte Carlo simulations show that the test performs well in finite samples and generally has better power performance than the nonparametric test of Li ( Li, F.

Testing the parametric specification of the diffusion function in a diffusion process. Econometric Theory 23(2): – Cited by: 1. A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function.

The data are assumed to be sampled discretely in a time interval that can be fixed or lengthened to by: "A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function.

The data are assumed to be sampled discretely in a time interval that can be fixed or lengthened to infinity. A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function.

Downloadable. A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function.

The data are assumed to be sampled discretely in a time interval that can be fixed or lengthened to infinity. The test statistic is shown to follow an asymptotic normal distribution under the.

Testing the Parametric Specification of the Diffusion Function in a Diffusion Process. Fuchun Li. Staff Working Papers from Bank of Canada. Abstract: A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function.

The data are assumed to be sampled discretely in a time. TESTING THE PARAMETRIC SPECIFICATION OF THE DIFFUSION FUNCTION IN A DIFFUSION PROCESS. Fuchun Li.

Econometric Theory,vol. 23, issue 2, Abstract: A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function.

The data are assumed to be. For the parametric specification of the diffusion function, Table 2, Table 3, Table 4 show that the test L 1 T (h ̂ 1 test) has little size distortion compared with L 1 T (h ̂ 1 cv), as the size values in column 4 of Table 2, Table 3, Table 4 show that the use of an asymptotic critical value may contribute to the size distortion.

Moreover, columns 5–7 of Table 2, Table 3, Table 4 show that. Downloadable. The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process.

Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.

Using theories of degenerate U-statistics, each of these test statistics is shown to. A TEST FOR MODEL SPECIFICATION OF DIFFUSION PROCESSES By Song Xi Chen,1,2 Jiti Gao1,3 and Cheng Yong Tang1,2 Iowa State University, University of Western Australia and Iowa State University We propose a test for model specification of a parametric diffu-sion process based on a kernel estimation of the transitional density of the process.

The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion l, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.

Using theories of degenerate U-statistics, each of these test statistics is shown to follow an. In this paper, we propose a nonparametric estimator of the short rate diffusion process using observations of a panel of yields.

The proposed estimator can greatly reduce the bias of the nonparametric estimator proposed in Stanton () that uses a.

Testing the parametric specification of the diffusion function in a diffusion process. Econometric Theory By and Fuchun Li and Fuchun Li. Abstract. The views expressed in this paper are those of the author. No responsibility for them should be attributed to the Bank of Canada.

Download PDF: Sorry, we are unable to provide the full text but you may find it at the following location(s): (external link). In this paper, we propose a nonparametric identification and estimation procedure for an It6 diffusion process based on discrete sampling observations.

The nonparametric kernel estimator for the diffusion function developed in this paper deals with general It6 diffusion processes and avoids any functional form specification for either the drift function or the diffusion function.

We are interested in testing parametric specifications of the drift and diffusion function. We will throughout work under the maintained (nonparametric) hypothesis that {X t} is a Markov diffusion process, H NP: {X t} solves Eq.

(1) with σ 2 (⋅) and μ (⋅) unspecified. Testing the Parametric Specification of Diffusion Processes Null hypothesis and test statistics. The main focus of the test is on models for the spot interest rate that belong to the class of (1) Markov processes of (2) the univariate diffusion type, which are (3) strictly stationary.

The diffusion-rate specification is flexible, and provides direct parametric support for static volatilities and state vector exponents.

It is also extensible, and provides indirect support for dynamic/nonlinear models via an interface. This enables you to specify virtually any diffusion-rate specification. For testing one-dimensional diffusion, in a pioneering work, Ait-Sahalia proposed an approach for testing the parametric specification model based on marginal density [1].

The advantage of the test is that the parametric marginal density of most of the diffusion processes is easy to know.

But the method has several limitations. 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. A TEST FOR MODEL SPECIFICATION OF DIFFUSION PROCESSES By Song Xi Chen, Jiti Gao and Cheng Yong Tang Iowa State University, The University of Western Australia and Iowa State University We propose a test for model specification of a parametric diffusion process based on a kernel estimation of the transitional density of the process.

The em.We propose a test for model specification of a parametric diffusion process based on a kernel estimation of the transitional density of the process. The empirical likelihood is used to formulate a statistic, for each kernel smoothing bandwidth, which is effectively a Studentized L 2 -distance between the kernel transitional density estimator.You can simulate any vector-valued CIR process of the form: (non-time-varying) parametric specification.

This array fully captures all implementation details, which are clearly associated with a parametric form.callable as a function of time and state.

Diffusion — Composite diffusion-rate function.