Nonparametric Threshold Estimation for Drift Function in Jump–Diffusion Model of Interest Rate Using Asymmetric Kernel

Yuping Song, Chen Li, Hemin Wang, Jiayi Meng and Liang Hao ()
Additional contact information
Yuping Song: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China
Chen Li: Institute for Financial Studies, Shandong University, Jinan 250100, China
Hemin Wang: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China
Jiayi Meng: School of Economics and Management, China Jiliang University, Hangzhou 310018, China
Liang Hao: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China

Mathematics, 2023, vol. 11, issue 10, 1-16

Abstract: The existing estimators for the drift coefficient in the diffusion model with jumps involve jump components and possess larger boundary error. How to effectively estimate the drift function is an important issue that faces challenges and has theoretical significance. In this paper, the gamma asymmetric kernel for boundary correction and threshold function eliminating jump impacts are combined to estimate the unknown drift coefficient in the jump diffusion process of interest rate. The asymptotic large sample property and the better finite sample property through the Monte Carlo numerical simulation experiment and the empirical analysis of SHIBOR and LIBOR for the corresponding estimator are considered in detail. It is found that the estimator proposed in this paper can correct the estimation error near or far away from the origin point, which provides a more asymptotic unbiased estimator for the drift function in diffusion models with jumps.

Keywords: jump–diffusion process; drift coefficient; short-term interest rate; gamma asymmetrical kernel; threshold function; bias reduction (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/11/10/2281/pdf (application/pdf)
https://www.mdpi.com/2227-7390/11/10/2281/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:11:y:2023:i:10:p:2281-:d:1146496

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().