Economy – Quantitative Finance – Statistical Finance
Scientific paper
2008-01-10
Statistics Surveys 2008, Vol. 2, 1-42
Economy
Quantitative Finance
Statistical Finance
Published in at http://dx.doi.org/10.1214/08-SS034 the Statistics Surveys (http://www.i-journals.org/ss/) by the Institute of
Scientific paper
10.1214/08-SS034
Financial econometrics has become an increasingly popular research field. In this paper we review a few parametric and nonparametric models and methods used in this area. After introducing several widely used continuous-time and discrete-time models, we study in detail dependence structures of discrete samples, including Markovian property, hidden Markovian structure, contaminated observations, and random samples. We then discuss several popular parametric and nonparametric estimation methods. To avoid model mis-specification, model validation plays a key role in financial modeling. We discuss several model validation techniques, including pseudo-likelihood ratio test, nonparametric curve regression based test, residuals based test, generalized likelihood ratio test, simultaneous confidence band construction, and density based test. Finally, we briefly touch on tools for studying large sample properties.
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