Article ID: | iaor20127733 |
Volume: | 83 |
Issue: | 1 |
Start Page Number: | 1 |
End Page Number: | 9 |
Publication Date: | Sep 2012 |
Journal: | Mathematics and Computers in Simulation |
Authors: | McAleer Michael, Huang Jian, Kobayashi Masahito |
Keywords: | numerical analysis |
This paper analyses the constant elasticity of volatility (CEV) model suggested by Chan et al. (1992). The CEV model without mean reversion is shown to be the inverse Box–Cox transformation of integrated processes asymptotically. It is demonstrated that the maximum likelihood estimator of the power parameter has a nonstandard asymptotic distribution, which is expressed as an integral of Brownian motions, when the data generating process is not mean reverting. However, it is shown that the