Maximum Likelihood Estimation of Discretely Sampled Diffusions: A Closed-Form Approximation Approach

By Ait-Sahalia Yacine
Econometrica (2002)

  • Yacine Ait-Sahalia

    Princeton University

    USA

Created

September 26, 2013

Last update

June 20, 2016

Software

Matlab

Ranking

6

Visits

14101

Downloads

848

Description

The code, written in MATLAB, implements the closed-form maximum-likelihood estimation method for continuous-time processes in economics and finance. First, the code maximizes the log-likelihood function and displays the MLE estimates, the standard error estimates (constructed from the inverse of Hessian) and the misspecification-robust standard error (i.e., the sandwich estimate). Second, it reports whether the maximization procedure converges under the default tolerance. Finally, it plots the marginal log-likelihood for each parameter in a neighborhood of the estimates. The blue curve is the likelihood function, while each red star corresponds to the estimate for the corresponding parameter. For more information about the models, please read the user's guide (link "more").

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