Closed-Form Likelihood Expansions for Multivariate Diffusions / Yacine Ait-Sahalia.

Format:

Book

Author/Creator:

Ait-Sahalia, Yacine.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8956.

NBER working paper series no. w8956

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

This paper provides closed-form expansions for the transition density and likelihood function of arbitrary multivariate diffusions. The expansions are based on a Hermite series, whose coefficients are calculated explicitly by exploiting the special structure afforded by the diffusion hypothesis. Because the transition function for most diffusion models is not known explicitly, the expansions of this paper can help make maximum-likelihood a practical estimation method for discretely sampled multivariate diffusions. Examples of interest in financial econometrics are included.

Notes:

Print version record

May 2002.