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Activity Number:
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468
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Type:
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Contributed
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Date/Time:
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Wednesday, August 9, 2006 : 2:00 PM to 3:50 PM
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Sponsor:
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Business and Economics Statistics Section
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| Abstract - #305779 |
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Title:
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Parameters Estimation and Bias Corrections for Diffusion Processes
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Author(s):
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Chengyong Tang*+ and Song X. Chen
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Companies:
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Iowa State University and Iowa State University
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Address:
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204 Snedecor Hall, Ames, IA, 50011,
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Keywords:
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diffusion ; Vasicek processes ; CIR processes ; bias correction ; jackknife ; bootstrap
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Abstract:
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Various diffusion processes are popular models for different interest rates in financial applications. The existing methods of estimating the parameters of diffusion processes are subject to serious bias problem when the mean reverting of the processes is weak, which is often the case for the commonly used processes in interest rates modeling. The serious bias is potentially harmful in applications, e.g. in the pricing problems. This paper examines the performance of commonly used estimators for diffusion processes. Explicit expansion for mean and variance are given. Methods for bias correction are discussed.
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