Nonparametric estimation of scalar diffusion models of interest rates using asymmetric kernels

► Nonparametric estimator for diffusion models with positive conditioning variables. ► Estimator is based on asymmetric (Gamma) kernel functions. ► We derive the asymptotic properties of the drift and diffusion function estimators. ► We show the bias correction and efficiency gains of the proposed method. ► The proposed method is used for bond and derivative pricing.