Specification testing in discretized diffusion models: Theory and practice

Specification testing in discretized diffusion models: Theory and practice

We propose two new tests for the specification of both the drift and the diffusion functions in a discretized version of a semiparametric continuous–time financial econometric model. Theoretically, we establish some asymptotic consistency results for the proposed tests. Practically, a simple selection procedure for the bandwidth parameter involved in each of the proposed tests is established ba...

The theory and practice of specification based software testing

In this thesis my aim is to examine the common ground between formal methods and testing, and the benefits the two fields bring to one another. All too often they are regarded as mutually exclusive approaches in the development of software systems. The thesis begins with an examination of the motivation behind software testing, a summary of its development over the past few decades, and a surve...

Discretized diffusion processes

We study the properties of the "rigid Laplacian" operator; that is we consider solutions of the Laplacian equation in the presence of fixed truncation errors. The dynamics of convergence to the correct analytical solution displays the presence of a metastable set of numerical solutions, whose presence can be related to granularity. We provide some scaling analysis in order to determine the valu...

Theory of X-machines with applications in specification and testing

Specification Testing for Panel Spatial Models

Specification of a model is one of the most fundamental problems in econometrics. In most cases, specification tests are carried out in a piecemeal fashion, for example, testing the presence of one-effect at a time ignoring the potential presence of other forms of misspecification. It is also much to expect from a practioners to estimate a complex general model and then to carry out specificati...