Seeing the Wood for the Trees: A Critical Evaluation of Methods to Estimate the Parameters of Stochastic Differential Equations

Stan Hurn, J. I. Jeisman and K. A. Lindsay

Journal of Financial Econometrics, vol. 5, issue 3, 390-455

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 article 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. Copyright , Oxford University Press.

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Working Paper: Seeing the wood for the trees: A critical evaluation of methods to estimate the parameters of stochastic differential equations (2006)
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