Semimartingale detection and goodness-of-fit tests

Adam D. Bull

Papers from arXiv.org

Abstract: In quantitative finance, we often fit a parametric semimartingale model to asset prices. To ensure our model is correct, we must then perform goodness-of-fit tests. In this paper, we give a new goodness-of-fit test for volatility-like processes, which is easily applied to a variety of semimartingale models. In each case, we reduce the problem to the detection of a semimartingale observed under noise. In this setting, we then describe a wavelet-thresholding test, which obtains adaptive and near-optimal detection rates.

Date: 2015-05, Revised 2016-06
New Economics Papers: this item is included in nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1506.00088

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