Nonparametric Estimation for the Diffusion Coefficient of Multidimensional Time-Varying Diffusion Processes

This paper proposes a kernel estimator for the coefficient of multidimensional time-varying diffusion processes as an extension of the estimation model for one dimensional diffusion coefficient to the multidimensional case. By using “time division”, the authors overcome the problem of sample observation in time varying model. In addition, the authors prove the strong consistency and limit distribution of the estimator. Finally, the authors test the performance of the estimator through a simulation experiment and an empirical application.