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Reprojecting partially observed systems with application to interest rate diffusions

Publication ,  Journal Article
Gallant, AR; Tauchen, G
Published in: Journal of the American Statistical Association
March 1, 1998

We introduce reprojection as a general purpose technique for characterizing the dynamic response of a partially observed nonlinear system to its observable history. Reprojection is the third step of a procedure wherein first data are summarized by projection onto a Hermite series representation of the unconstrained transition density for observables; second, system parameters are estimated by minimum chi-squared, where the chi-squared criterion is a quadratic form in the expected score of the projection; and third, the constraints on dynamics implied by the nonlinear system are imposed by projecting a long simulation of the estimated system onto a Hermite series representation of the constrained transition density for observables. The constrained transition density can be used to study the response of the system to its observable history. We utilize the technique to assess the dynamics of several diffusion models for the short-term interest rate that have been proposed and to compare them to a new model that has feedback from the interest rate into both the drift and diffusion coefficients of a volatility equation. © 1998 Taylor & Francis Group, LLC.

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Published In

Journal of the American Statistical Association

DOI

EISSN

1537-274X

ISSN

0162-1459

Publication Date

March 1, 1998

Volume

93

Issue

441

Start / End Page

10 / 24

Related Subject Headings

  • Statistics & Probability
  • 4905 Statistics
  • 3802 Econometrics
  • 1603 Demography
  • 1403 Econometrics
  • 0104 Statistics
 

Citation

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Gallant, A. R., & Tauchen, G. (1998). Reprojecting partially observed systems with application to interest rate diffusions. Journal of the American Statistical Association, 93(441), 10–24. https://doi.org/10.1080/01621459.1998.10474083
Gallant, A. R., and G. Tauchen. “Reprojecting partially observed systems with application to interest rate diffusions.” Journal of the American Statistical Association 93, no. 441 (March 1, 1998): 10–24. https://doi.org/10.1080/01621459.1998.10474083.
Gallant AR, Tauchen G. Reprojecting partially observed systems with application to interest rate diffusions. Journal of the American Statistical Association. 1998 Mar 1;93(441):10–24.
Gallant, A. R., and G. Tauchen. “Reprojecting partially observed systems with application to interest rate diffusions.” Journal of the American Statistical Association, vol. 93, no. 441, Mar. 1998, pp. 10–24. Scopus, doi:10.1080/01621459.1998.10474083.
Gallant AR, Tauchen G. Reprojecting partially observed systems with application to interest rate diffusions. Journal of the American Statistical Association. 1998 Mar 1;93(441):10–24.

Published In

Journal of the American Statistical Association

DOI

EISSN

1537-274X

ISSN

0162-1459

Publication Date

March 1, 1998

Volume

93

Issue

441

Start / End Page

10 / 24

Related Subject Headings

  • Statistics & Probability
  • 4905 Statistics
  • 3802 Econometrics
  • 1603 Demography
  • 1403 Econometrics
  • 0104 Statistics