Nonparametric drift estimation from diffusions with correlated Brownian motions

Fabienne Comte and Nicolas Marie

Journal of Multivariate Analysis, 2023, vol. 198, issue C

Abstract: In the present paper, we consider that N diffusion processes X1,…,XN are observed on [0,T], where T is fixed and N grows to infinity. Contrary to most of the recent works, we no longer assume that the processes are independent. The dependency is modeled through correlations between the Brownian motions driving the diffusion processes. A nonparametric estimator of the drift function, which does not use the knowledge of the correlation matrix, is proposed and studied. Its integrated mean squared risk is bounded and an adaptive procedure is proposed. Few theoretical tools to handle this kind of dependency are available, and this makes our results new. Numerical experiments show that the procedure works in practice.

Keywords: Correlated Brownian motions; Diffusion processes; Model selection; Projection least squares estimator (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.jmva.2023.105222

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