We propose two nonparametric transition density-based speciÞcation tests for continuous-time diffusion models. In contrast to marginal density as used in the literature, transition density can capture the full dynamics of a diffusion process, and in particular, can distinguish processes with...

Based on a multivariate extension of the constrained locally polynomial estimator of Aït-Sahalia and Duarte (2003), we provide one of the first nonparametric estimates of probability densities of LIBOR rates under forward martingale measures and state-price densities (SPDs) implicit in interest...