Estimating the diffusion coefficient function for a diversified world stock index | Macquarie University ResearchOnline

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Title: Estimating the diffusion coefficient function for a diversified world stock index
Related: Computational statistics and data analysis, Vol. 56, No. 6, (2012), p.1333-1349
DOI: 10.1016/j.csda.2011.10.004
Publisher: Elsevier
Date: 2012
Author/Creator: Ignatieva, Katja
Author/Creator: Platen, Eckhard
Description: This paper deals with the estimation of continuous-time diffusion processes which model the dynamics of a well diversified world stock index (WSI). We use the nonparametric kernel-based estimation to empirically identify a square root type diffusion coefficient function in the dynamics of the discounted WSI. A square root process turns out to be an excellent building block for a parsimonious model for the WSI. Its dynamics allow capturing various empirical stylized facts and long term properties of the index, as well as, the explicit computation of various financial quantities.
Description: 17 page(s)
Subject Keyword: Diffusion coefficient function
Subject Keyword: Diversified world stock index
Subject Keyword: Kernel density
Subject Keyword: Nonparametric estimation
Subject Keyword: Square root process
Resource Type: journal article
Organisation: Macquarie University. Dept. of Applied Finance and Actuarial Studies

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