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Infinitesimal robustness for diffusions

MandatorDepartment of Economics, University of St. Gallen
Number of pages49
PublisherSt. Gallen : Department of Economics, University of St. Gallen
Publication date2008
Abstract

We develop infinitesimally robust statistical procedures for the general diffusion processes. We first prove the existence and uniqueness of the times-series influence function of conditionally unbiased M-estimators for ergodic and stationary diffusions, under weak conditions on the (martingale) estimating function used. We then characterize the robustness of M-estimators for diffusions and derive a class of conditionally unbiased optimal robust estimators. To compute these estimators, we propose a general algorithm, which exploits approximation methods for diffusions in the computation of the robust estimating function. Monte Carlo simulation shows a good performance of our robust estimators and an application to the robust estimation of the exchange rate dynamics within a target zone illustrates the methodology in a real-data application.

Keywords
  • Diffusion processes
  • Eigenexpansion
  • Infinitesimal generator
  • Influence function
  • M-estimators
  • Saddle point approximation
Citation (ISO format)
LA VECCHIA, Davide, TROJANI, Fabio. Infinitesimal robustness for diffusions. 2008
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  • PID : unige:75158
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Creation09/09/2015 00:03:00
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