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Inference and forecasting for continuous-time integer-valued trawl processes and their use in financial economics

Publikation: Working paper/Preprint › Working paper › Forskning

Dokumenter

  • rp21_12

    Forlagets udgivne version, 1,94 MB, PDF-dokument

This paper develops likelihood-based methods for estimation, inference, model selection, and forecasting of continuous-time integer-valued trawl processes. The full likelihood of integer-valued trawl processes is, in general, highly intractable, motivating the use of composite likelihood methods, where we consider the pairwise likelihood in lieu of the full likelihood. Maximizing the pairwise likelihood of the data yields an estimator of the parameter vector of the model, and we prove consistency and asymptotic normality of this estimator. The same methods allow us to develop probabilistic forecasting methods, which can be used to construct the predictive distribution of integer-valued time series. In a simulation study, we document good finite sample performance of the likelihood-based estimator and the associated model selection procedure. Lastly, the methods are illustrated in an application to modelling and forecasting financial bid-ask spread data, where we find that it is beneficial to carefully model both the marginal distribution and the autocorrelation structure of the data. We argue that integer-valued trawl processes are especially well-suited in such situations.
OriginalsprogEngelsk
UdgivelsesstedAarhus
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider79
StatusUdgivet - 27 jul. 2021
SerietitelCREATES Research Paper
Nummer2021-12

    Forskningsområder

  • Integer valued trawl process, Lévy basis, Composite likelihood, Pairwise likelihood, Estimation, Model selection, Forecasting

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