MAXIMUM LIKELIHOOD ESTIMATION USING PRICE DATA OF THE DERIVATIVE CONTRACT

Jin‐Chuan Duan

Mathematical Finance, 1994, vol. 4, issue 2, 155-167

Abstract: This article develops a general methodology that uses the observed prices of a derivative contract to compute maximum likelihood parameter estimates for an unobserved asset value process. the use of this estimation methodology is demonstrated in two applications: Vasicek's term structure model and deposit insurance pricing. This methodology can also be useful in the empirical analysis of complex financial contracts involving embedded options.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:bla:mathfi:v:4:y:1994:i:2:p:155-167

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