Arbeitspapier
Estimation of integrated volatility in continuous time financial models with applications to goodness-of-fit testing
Properties of a specification test for the parametric form of the variance function in diffusion processes dXt = b (t,Xt) dt + sigma (t,Xt) dWt are discussed. The test is based on the estimation of certain integrals of the volatility function. If the volatility function does not depend on the variable x it is known that the corresponding statistics have an asymptotic normal distribution. However, most models of mathematical finance use a volatility function which depends on the state x. In this paper we prove that in the general case, where sigma depends also on x the estimates of integrals of the volatility converge stably in law to random variables with a non-standard limit distribution. The limit distribution depends on the diffusion process Xt itself and we use this result to develop a bootstrap test for the parametric form of the volatility function, which is consistent in the general diffusion model.
- Language
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Englisch
- Bibliographic citation
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Series: Technical Report ; No. 2004,32
- Subject
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continuous time financial model
model diagnostics
diffusion process
heteroscedasticity
pseudo residuals
parametric bootstrap
Zeitreihenanalyse
Volatilität
Finanzmarkt
Statistischer Test
Theorie
- Event
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Geistige Schöpfung
- (who)
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Vetter, Mathias
Podolskij, Mark
Dette, Holger
- Event
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Veröffentlichung
- (who)
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Universität Dortmund, Sonderforschungsbereich 475 - Komplexitätsreduktion in Multivariaten Datenstrukturen
- (where)
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Dortmund
- (when)
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2004
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Vetter, Mathias
- Podolskij, Mark
- Dette, Holger
- Universität Dortmund, Sonderforschungsbereich 475 - Komplexitätsreduktion in Multivariaten Datenstrukturen
Time of origin
- 2004
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