On the efficacy of simulated maximum likelihood for estimating the parameters of stochastic differential Equations

Stan Hurn, K. A. Lindsay and Vance Martin

Journal of Time Series Analysis, 2003, vol. 24, issue 1, 45-63

Abstract: Abstract. A method for estimating the parameters of stochastic differential equations (SDEs) by simulated maximum likelihood is presented. This method is feasible whenever the underlying SDE is a Markov process. Estimates are compared to those generated by indirect inference, discrete and exact maximum likelihood. The technique is illustrated with reference to a one‐factor model of the term structure of interest rates using 3‐month US Treasury Bill data.

Date: 2003
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