Abstract.This paper introduces a family of recursively defined estimators of the parameters of a diffusion process. We use ideas of stochastic algorithms for the construction of the estimators. Asymptotic consistency of these estimators and asymptotic normality of an appropriate normalization are proved. The results are applied to two examples from the financial literature; viz., Cox-Ingersoll-Ross model and the constant elasticity of variance (CEV) process illustrate the use of the technique proposed herein.

Received: April 24, 2003

AMS Subject Classification: 62M05, 62P05

Key Words and Phrases: continuous time Markov processes, discrete time sampling, diffusions, interest rate models, stochastic algorithms

Source: International Journal of Pure and Applied Mathematics
ISSN: 1311-8080
Year: 2003
Volume: 7
Issue: 4