Efficient importance sampling maximum likelihood estimation of stochastic differential equations

S. Pastorello and Eduardo Rossi

Computational Statistics & Data Analysis, 2010, vol. 54, issue 11, 2753-2762

Abstract: Maximum likelihood estimation (MLE) of stochastic differential equations (SDEs) is difficult because in general the transition density function of these processes is not known in closed form, and has to be approximated somehow. An approximation based on efficient importance sampling (EIS) is detailed. Monte Carlo experiments, based on widely used diffusion processes, evaluate its performance against an alternative importance sampling (IS) strategy, showing that EIS is at least equivalent, if not superior, while allowing a greater flexibility needed when examining more complicated models.

Keywords: Diffusion; process; Stochastic; differential; equation; Transition; density; Importance; sampling; Simulated; maximum; likelihood (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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