Abstract
A review is given of parametric estimation methods for discretely sampled multivariate diffusion processes. The main focus is on estimating functions and asymptotic results. Maximum likelihood estimation is briefly considered, but the emphasis is on computationally less demanding martingale estimating functions. Particular attention is given to explicit estimating functions. Results on both fixed frequency and high frequency asymptotics are given. When choosing among the many estimators available, guidance is provided by simple criteria for high frequency efficiency and rate optimality that are presented in the framework of approximate martingale estimating functions.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Aït-Sahalia, Y. (2002): Maximum likelihood estimation of discretely sampled diffusions: a closed-form approximation approach. Econometrica 70, 223–262.
Aït-Sahalia, Y. (2003): Closed-form likelihood expansions for multivariate diffusions. Working paper, Princeton University. Ann. Statist. to appear.
Aït-Sahalia, Y. and Mykland, P. (2003): The effects of random and discrete sampling when estimating continuous-time diffusions. Econometrica 71, 483–549.
Aït-Sahalia, Y. and Mykland, P. A. (2004): Estimators of diffusions with randomly spaced discrete observations: a general theory. Ann. Statist. 32, 2186–2222.
Beskos, A., Papaspiliopoulos, O., Roberts, G. O., and Fearnhead, P. (2006): Exact and computationally efficient likelihood-based estimation for discretely observed diffusion processes. J. Roy. Statist. Soc. B 68, 333–382.
Bibby, B. M. and Sørensen, M. (1995): Martingale estimation functions for discretely observed diffusion processes. Bernoulli 1, 17–39.
Bibby, B. M. and Sørensen, M. (1996): On estimation for discretely observed diffusions: a review. Theory of Stochastic Processes 2, 49–56.
Billingsley, P. (1961): The lindeberg-lévy theorem for martingales. Proc. Amer. Math. Soc. 12, 788–792.
Bollerslev, T. and Wooldridge, J. (1992): Quasi-maximum likelihood estimators and inference in dynamic models with time-varying covariances. Econometric Review 11, 143–172.
Campbell, J. Y., Lo, A. W., and MacKinlay, A. C.(1997): The Econometrics of Financial Markets. Princeton University Press, Princeton.
Chan, K. C., Karolyi, G. A., Longstaff, F. A., and Sanders, A. B. (1992): An empirical comparison of alternative models of the short-term interest rate. Journal of Finance 47, 1209–1227.
Dacunha-Castelle, D. and Florens-Zmirou, D. (1986): Estimation of the coefficients of a diffusion from discrete observations. Stochastics 19, 263–284.
De Jong, F., Drost, F. C., and Werker, B. J. M. (2001): A jump-diffusion model for exchange rates in a target zone. Statistica Neerlandica 55, 270–300.
Dorogovcev, A. J. (1976): The consistency of an estimate of a parameter of a stochastic differential equation. Theor. Probability and Math. Statist. 10, 73–82.
Doukhan, P. (1994):Mixing, Properties and Examples. Lecture Notes in Statistics 85. Springer, New York.
Durbin, J. (1960): Estimation of parameters in time-series regression models. J. Roy. Statist. Soc. B 22, 139–153.
Durham, G. B. and Gallant, A. R. (2002): Numerical techniques for maximum likelihood estimation of continuous-time diffusion processes. J. Business & Econom. Statist. 20, 297–338.
Elerian, O., Chib, S., and Shephard, N. (2001): Likelihood inference for discretely observed non-linear diffusions. Econometrica 69, 959–993.
Eraker, B. (2001): Mcmc analysis of diffusion models with application to finance. J. Business & Econom. Statist. 19, 177–191.
Florens-Zmirou, D. (1989): Approximate discrete-time schemes for statistics of diffusion processes. Statistics 20, 547–557.
Forman, J. L. and Sørensen, M. (2008): The pearson diffusions: A class of statistically tractable diffusion processes. Scand. J. Statist. to appear.
Genon-Catalot, V. (1990): Maximum contrast estimation for diffusion processes from discrete observations. Statistics 21, 99–116.
Genon-Catalot, V. and Jacod, J. (1993): On the estimation of the diffusion coefficient for multi-dimensional diffusion processes. Ann. Inst. Henri Poincaré, Probabilités et Statistiques 29, 119–151.
Genon-Catalot, V., Jeantheau, T., and Larédo, C. (2000): Stochastic volatility models as hidden markov models and statistical applications. Bernoulli 6, 1051–1079.
Gloter, A. and Sørensen, M. (2008): Estimation for stochastic differential equations with a small diffusion coefficient. Stoch. Proc. Appl. to appear.
Gobet, E. (2002): Lan property for ergodic diffusions with discrete observations. Ann. Inst. Henri Poincaré, Probabilités et Statistiques 38, 711–737.
Godambe, V. P. (1960): An optimum property of regular maximum likelihood estimation. Ann. Math. Stat. 31, 1208–1212.
Godambe, V. P. and Heyde, C. C. (1987): Quasi likelihood and optimal estimation. International Statistical Review 55, 231–244.
Hall, P. and Heyde, C. C. (1980): Martingale Limit Theory and Its Applications. Academic Press, New York.
Hansen, L. P. (1982): Large sample properties of generalized method of moments estimators. Econometrica 50, 1029–1054.
Hansen, L. P. and Scheinkman, J. A. (1995): Back to the future: generating moment implications for continuous-time markov processes. Econometrica 63, 767–804.
Heyde, C. C. (1997): Quasi-Likelihood and Its Application. Springer-Verlag, New York.
Jacobsen, M. (2001): Discretely observed diffusions; classes of estimating functions and small δ-optimality. Scand. J. Statist. 28, 123–150.
Jacobsen, M. (2002): Optimality and small δ-optimality of martingale estimating functions. Bernoulli 8, 643–668.
Jacod, J. and Sørensen, M. (2008): Asymptotic statistical theory for stochastic processes: a review. Preprint, Department of Mathematical Sciences, University of Copenhagen.
Kelly, L., Platen, E., and Sørensen, M. (2004): Estimation for discretely observed diffusions using transform functions. J. Appl. Prob. 41, 99–118.
Kessler, M. (1996): Estimation paramétrique des coefficients d'une diffusion ergodique à partir d'observations discrètes. PhD thesis, Laboratoire de Probabilités, Université Paris VI.
Kessler, M. (1997): Estimation of an ergodic diffusion from discrete observations. Scand. J. Statist. 24, 211–229.
Kessler, M. (2000): Simple and explicit estimating functions for a discretely observed diffusion process. Scand. J. Statist. 27, 65–82.
Kessler, M. and Paredes, S. (2002): Computational aspects related to martingale estimating functions for a discretely observed diffusion. Scand. J. Statist. 29, 425–440.
Kessler, M. and Sørensen, M. (1999): Estimating equations based on eigenfunctions for a discretely observed diffusion process. Bernoulli 5, 299–314.
Kusuoka, S. and Yoshida, N. (2000): Malliavin calculus, geometric mixing, and expansion of diffusion functionals. Probability Theory and Related Fields 116, 457–484.
Larsen, K. S. and Sørensen, M. (2007): A diffusion model for exchange rates in a target zone. Mathematical Finance 17, 285–306.
Nagahara, Y. (1996): Non-gaussian distribution for stock returns and related stochastic differential equation. Financial Engineering and the Japanese Markets 3, 121–149.
Overbeck, L. and Rydén, T. (1997): Estimation in the cox-ingersoll-ross model. Econometric Theory 13, 430–461.
Ozaki, T. (1985): Non-linear time series models and dynamical systems. In: Hannan, E. J., Krishnaiah, P. R., and Rao, M. M. (Eds.): Handbook of Statistics 5, 25–83. Elsevier Science Publishers.
Pedersen, A. R. (1995): A new approach to maximum likelihood estimation for stochastic differential equations based on discrete observations. Scand. J. Statist. 22, 55–71.
Phillips, P.C.B. and Yu, J. (2008): Maximum likelihood and Gaussian estimation of continuous time models in finance. In: Andersen, T. G., Davis, R. A., Kreiss, J.-P. and Mikosch, T. (Eds.): Handbook of Financial Time Series. 497–530. Springer, New York.
Poulsen, R. (1999): Approximate maximum likelihood estimation of discretely observed diffusion processes. Working Paper 29, Centre for Analytical Finance, Aarhus.
Prakasa Rao, B. L. S. (1988): Statistical inference from sampled data for stochastic processes. Contemporary Mathematics 80, 249–284.
Roberts, G. O. and Stramer, O. (2001): On inference for partially observed nonlinear diffusion models using metropolis-hastings algorithms. Biometrika 88, 603–621.
Skorokhod, A. V. (1989): Asymptotic Methods in the Theory of Stochastic Differential Equations. American Mathematical Society, Providence, Rhode Island.
Sørensen, H. (2001): Discretely observed diffusions: Approximation of the continuous-time score function. Scand. J. Statist. 28, 113–121.
Sørensen, M. (1997): Estimating functions for discretely observed diffusions: a review. In: Basawa, I. V., Godambe, V. P. and Taylor, R. L. (Eds.): Selected Proceedings of the Symposium on Estimating Functions, 305–325. IMS Lecture Notes–Monograph Series 32. Institute of Mathematical Statistics, Hayward.
Sørensen, M. (2007): Efficient estimation for ergodic diffusions sampled at high frequency. Preprint, Department of Mathematical Sciences, University of Copenhagen.
Sørensen, M. and Uchida, M. (2003): Small-diffusion asymptotics for discretely sampled stochastic differential equations. Bernoulli 9, 1051–1069.
Veretennikov, A. Y. (1987): Bounds for the mixing rate in the theory of stochastic equations. Theory of Probability and its Applications 32, 273–281.
Wong, E. (1964): The construction of a class of stationary markoff processes. In: Bellman, R. (Ed.): Stochastic Processes in Mathematical Physics and Engineering, 264–276. American Mathematical Society, Rhode Island.
Yoshida, N. (1992): Estimation for diffusion processes from discrete observations. Journal of Multivariate Analysis 41, 220–242.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2009 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Sørensen, M. (2009). Parametric Inference for Discretely Sampled Stochastic Differential Equations. In: Mikosch, T., Kreiß, JP., Davis, R., Andersen, T. (eds) Handbook of Financial Time Series. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-71297-8_23
Download citation
DOI: https://doi.org/10.1007/978-3-540-71297-8_23
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-71296-1
Online ISBN: 978-3-540-71297-8
eBook Packages: Mathematics and StatisticsMathematics and Statistics (R0)