Sticky-threshold diffusions, local time approximation and parameter estimation
Résumé
We study a class of high frequency path functionals of a diffusion with a sticky-oscillating-skew (SOS) threshold, including the case of a sticky-reflection, and
establish convergence to the local time. This extends existing results on sticky, oscillating (regime-switching) and skew or reflecting diffusions in several directions. First, it considers any normalizing sequence that diverges slower than n. Second, it allows combinations of these features. Based on this, and an approximation of the occupation time, we devise consistent skew and stickiness parameter estimators.
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