Department
Economics, Finance and Quantitative Analysis
Document Type
Article
Publication Date
7-2011
Abstract
This paper introduces a quasi-maximum likelihood estimator for discretely observed diffusions when a closed-form transition density is unavailable. Higher-order Wagner-Platen strong approximation is used to derive the first two conditional moments and a normal density function is used in estimation. Simulation study shows that the proposed estimator has high numerical precision and good numerical robustness. This method is applicable to a large class of diffusions.
Journal Title
The Econometrics Journal
Journal ISSN
1368-4221
Volume
14
Issue
2
First Page
241
Last Page
256