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Parameter inference for degenerate diffusion processes

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  • Iguchi, Yuga
  • Beskos, Alexandros
  • Graham, Matthew M.

Abstract

We study parametric inference for ergodic diffusion processes with a degenerate diffusion matrix. Existing research focuses on a particular class of hypo-elliptic Stochastic Differential Equations (SDEs), with components split into ‘rough’/‘smooth’ and noise from rough components propagating directly onto smooth ones, but some critical model classes arising in applications have yet to be explored. We aim to cover this gap, thus analyse the highly degenerate class of SDEs, where components split into further sub-groups. Such models include e.g. the notable case of generalised Langevin equations. We propose a tailored time-discretisation scheme and provide asymptotic results supporting our scheme in the context of high-frequency, full observations. The proposed discretisation scheme is applicable in much more general data regimes and is shown to overcome biases via simulation studies also in the practical case when only a smooth component is observed. Joint consideration of our study for highly degenerate SDEs and existing research provides a general ‘recipe’ for the development of time-discretisation schemes to be used within statistical methods for general classes of hypo-elliptic SDEs.

Suggested Citation

  • Iguchi, Yuga & Beskos, Alexandros & Graham, Matthew M., 2024. "Parameter inference for degenerate diffusion processes," Stochastic Processes and their Applications, Elsevier, vol. 174(C).
    • Handle: RePEc:eee:spapps:v:174:y:2024:i:c:s0304414924000905
    DOI: 10.1016/j.spa.2024.104384
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    References listed on IDEAS

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    1. Samson, Adeline & Thieullen, Michèle, 2012. "A contrast estimator for completely or partially observed hypoelliptic diffusion," Stochastic Processes and their Applications, Elsevier, vol. 122(7), pages 2521-2552.
    2. Yvo Pokern & Andrew M. Stuart & Petter Wiberg, 2009. "Parameter estimation for partially observed hypoelliptic diffusions," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 71(1), pages 49-73, January.
    3. Cass, Thomas, 2009. "Smooth densities for solutions to stochastic differential equations with jumps," Stochastic Processes and their Applications, Elsevier, vol. 119(5), pages 1416-1435, May.
    4. Susanne Ditlevsen & Adeline Samson, 2019. "Hypoelliptic diffusions: filtering and inference from complete and partial observations," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 81(2), pages 361-384, April.
    5. Dureau, Joseph & Kalogeropoulos, Konstantinos & Baguelin, Marc, 2013. "Capturing the time-varying drivers of an epidemic using stochastic dynamical systems," LSE Research Online Documents on Economics 41749, London School of Economics and Political Science, LSE Library.
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