Semiparametric Estimation for Time-Inhomogeneous Diffusions

Abstract

We develop two likelihood based approaches to semiparametrically estimate the time-inhomogeneous diffusion process: log penalized splines (P-splines) and the local log-linear method. Positive volatility is naturally embedded and this positivity is not guaranteed in most existing diffusion models. We investigate different smoothing parameter selection… (More)

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