Nonparametric Continuous Time Regressions with Functional Coefficients

Mijung Choi, Jihyun Kim and Nuong Nguyen
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Mijung Choi: Sungkyunkwan University
Jihyun Kim: Sungkyunkwan University
Nuong Nguyen: University of Kentucky

Korean Economic Review, 2025, vol. 41, 141-174

Abstract: This paper considers a continuous time regression with functional coefficients in conditional mean and variance functions, where the covariate of the regression is assumed to be a general recurrent diffusion. We propose a kernel-based nonparametric estimation for these functional coefficients using discretely sampled data from the underlying continuous time regression. We obtain the limiting behaviors of the proposed estimators through a two- dimensional asymptotic analysis while assuming a shrinking sampling interval and increasing time span and without the stationarity assumption. We demonstrate the feasibility our approach on a short-term interest rate model involving U.S. daily three-month treasury bill rates.

Keywords: Continuous Time Regression; Recurrent Diffusion; Non/semiparametric Model; Functional Coefficients; Kernel Estimation (search for similar items in EconPapers)
JEL-codes: C14 C22 C58 (search for similar items in EconPapers)
Date: 2025
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