Seeing the Wood for the Trees: A Critical Evaluation of Methods to Estimate the Parameters of Stochastic Differential Equations. Working paper #2

Stan Hurn, J.Jeisman and K.A. Lindsay
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K.A. Lindsay: National Centre for Econometric Research

No 2, NCER Working Paper Series from National Centre for Econometric Research

Abstract: Maximum-likelihood estimates of the parameters of stochastic differential equations are consistent and asymptotically efficient, but unfortunately difficult to obtain if a closed form expression for the transitional probability density function of the process is not available. As a result, a large number of competing estimation procedures have been proposed. This paper provides a critical evaluation of the various estimation techniques. Special attention is given to the ease of implementation and comparative performance of the procedures when estimating the parameters of the Cox-Ingersoll-Ross and Ornstein-Uhlenbeck equations respectively.

Keywords: stochastic differential equations; parameter estimation; maximum likelihood; simulation; moments (search for similar items in EconPapers)
Date: 2006-07-15
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (2)

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