|
||||
|
||||
Nonparametric Transition-Based Tests for Jump-Diffusions
Yacine Ait-Sahalia Princeton University - Department of Economics; National Bureau of Economic Research (NBER) Jianqing Fan Princeton University - Bendheim Center for Finance Heng Peng Hong Kong Baptist University July 2005 Abstract: We develop a specification test for discretely-sampled jump-diffusions, based on a comparison of a nonparametric estimate of the transition density or distribution function to their corresponding parametric counterparts. As a special case, our method applies to pure diffusions. We propose three different discrepancy measures between the null and alternative transition density and distribution functions. We establish the asymptotic null distributions of proposed test statistics and compute their power functions. The finite sample properties are investigated via simulation studies and are compared with those of alternative tests.
Keywords: Generalized likelihood ratio tests, local linear fit, null distribution, jump-diffusions, Markovian processes, power, specification tests, transition density JEL Classifications: C52, G19 Working Paper SeriesDate posted: January 11, 2007 ; Last revised: January 11, 2007Suggested CitationContact Information
|
|
||||||||||||||||||||||||||
© 2009 Social Science Electronic Publishing, Inc. All Rights Reserved. Terms of Use Privacy Policy
This page was served by apollo3 in 0.125 seconds.