One Dimensional SDE Models, Low Order Numerical Methods and Simulation Based Estimation: A Comparison of Alternative Estimators

Eugene M Cleur and Piero Manfredi

Computational Economics, 1999, vol. 13, issue 2, 177-97

Abstract: We evaluate the effects of several discretization schemes on alternative estimators of the drift parameters of stochastic differential equations, namely the continuous time MLE, a so-called naive estimator and an indirect estimator obtained through calibration. Two main results are evidenced: first, the importance of correctly generating data in a simulation based estimation procedure and second, the role of an indirect estimation procedure through calibration as a general strategy to be used every time the conditions of the estimation experiment are not the optimal ones. Citation Copyright 1999 by Kluwer Academic Publishers.

Date: 1999
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