Realistic models for financial asset prices used in portfolio choice, option pricing or risk management include both a continuous Brownian and a jump components. This paper studies our ability to distinguish one from the other. I find that, surprisingly, it is possible to perfectly disentangle...

This paper provides closed-form expansions for the transition density and likelihood function of arbitrary multivariate diffusions. The expansions are based on a Hermite series, whose coefficients are calculated explicitly by exploiting the special structure afforded by the diffusion hypothesis....

Different continuous-time models for interest rates coexist in the literature. We test parametric models by comparing their implied parametric density to the same density estimated nonparametrically. We do not replace the continuous-time model by discrete approximations, even though the data are...