SMU SOE Online Seminar (Nov 12, 2021, 4.00pm-5.30pm):Inference and Forecasting for Continuous-Time Integer-Valued Trawl Processes and Their Use in Financial Economics

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TOPIC:

INFERENCE AND FORECASTING FOR CONTINUOUS-TIME INTEGER-VALUED TRAWL PROCESSES AND THEIR USE IN FINANCIAL ECONOMICS

ABSTRACT This paper develops likelihood-based methods for estimation, inference, model selection, and forecasting of continuous-time integer-valued trawl processes. The full likelihood of integervalued 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. Keywords: Integer valued trawl process; L´evy basis; composite likelihood; pairwise likelihood; estimation; model selection; forecasting. JEL Codes: C01; C13; C22; C51; C53; G17. Click here to view the paper. Click here to view the speaker's profile.		This seminar will be held virtually via Zoom. A confirmation email with the Zoom details will be sent to the registered email by 10 November 2021.
		PRESENTER Mikkel Bennedsen Aarhus University
		RESEARCH INTERESTS Climate Econometrics Climate Economics Financial econometrics Big Data High-frequency data Simulation and learning Energy and commodity markets Mathematical finance Stochastic calculus Mathematical economics Existential Risk
		DATE: 12 November 2021 (Friday)
		TIME: 4.00pm - 5.30pm

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