Estimation of jump-diffusion processes based on indirect inference

摘要

Jump-diffusion processes have been widely used to model financial time series to reflect discontinuity of asset returns. However, difficulty involved in the estimation of general jump-diffusion processes has prevented their implementation in empirical applications. This paper proposes the simulation-based indirect inference approach to the estimation of general parametric continuous-time jump-diffusion processes from discretely observed data. Applications to currency exchange rate models are undertaken to illustrate the estimation procedure and to present interesting empirical results.