Telling from discrete data whether the underlying continuous-time model is a diffusion

Deskripsi

Can disrretely sampled financial data help us decide which continuous-time models are sensible ? diffusion processes are characterized by the continuity of their sample paths. This cannot be verified from the discrete sample path : even if the underlying path were continuous, data sampled at discrete times will always appear as a succession of jumps. Instead, i rely on the transition density to determine whether the discontinuities observed are the result of the discreteness of sampling, or rather evidence of genuine jump dynamics for the underlying continuous-time process..Printed Journal