Estimating and Testing Continuous-Time Models in Finance: The Role of Transition Densities

Yacine Aït-Sahalia
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Yacine Aït-Sahalia: Department of Economics and Bendheim Center for Finance, Princeton University, Princeton, New Jersey 08540

Annual Review of Financial Economics, 2009, vol. 1, issue 1, pages 341-359

Abstract: This article surveys recent developments to estimate and test continuous-time models in finance using discrete observations on the underlying asset price or derivative securities' prices. Both parametric and nonparametric methods are described. All these methods share a common focus on the transition density as the central object for inference and testing of the model.

Keywords: maximum-likelihood; diffusions; jumps; Markov processes (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2009
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