A Test for Diffusion Model Based on Multi-Dimensional Tail Condition Expectations

In order to solve the problem of testing multidimensional diffusion models, we develop a test statistic based on Multi-Dimensional Tail Condition Expectations (CTEs). Although it is almost impossible to estimate the transition density matrix of a multidimensional diffusion model directly, the transition density of each component can be estimated and each component can be combined by the CTE to establish a true multidimensional statistics. Finally, the performance of the test is evaluated through simulation.