Parameter estimation for multivariate diffusion processes with the time inhomogeneously positive semidefinite diffusion matrix

Xiu-Li Du, Jin-Guan Lin and Xiu-Qing Zhou

Communications in Statistics - Theory and Methods, 2017, vol. 46, issue 22, 11010-11025

Abstract: Statistical inference for the diffusion coefficients of multivariate diffusion processes has been well established in recent years; however, it is not the case for the drift coefficients. Furthermore, most existing estimation methods for the drift coefficients are proposed under the assumption that the diffusion matrix is positive definite and time homogeneous. In this article, we put forward two estimation approaches for estimating the drift coefficients of the multivariate diffusion models with the time inhomogeneously positive semidefinite diffusion matrix. They are maximum likelihood estimation methods based on both the martingale representation theorem and conditional characteristic functions and the generalized method of moments based on conditional characteristic functions, respectively. Consistency and asymptotic normality of the generalized method of moments estimation are also proved in this article. Simulation results demonstrate that these methods work well.

Date: 2017
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DOI: 10.1080/03610926.2016.1257721

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