Paper detail

Higher Moments and Prediction Based Estimation for the COGARCH(1,1) model

COGARCH models are continuous time version of the well known GARCH models of financial returns. They are solution of a stochastic differential equation driven by a Lévy process. The first aim of this paper is to show how the method of Prediction-Based Estimating Functions (PBEFs) can be applied to draw statistical inference from a discrete sample of observations of a COGARCH(1,1) model as far as the higher order structure of the process is clarified. Motivated by the search for an optimal PBEF, a second aim of the paper is to provide recursive expressions for the joint moments of any fixed order of the process, whenever they exist. Asymptotic results are given and a simulation study shows that the method of PBEF outperforms the other available estimation methods.