Simulated Likelihood Estimation of Affine Term Structure Models from Panel Data
Download or Read eBook Simulated Likelihood Estimation of Affine Term Structure Models from Panel Data PDF written by Michael W. Brandt and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle.
Author | : Michael W. Brandt |
Publisher | : |
Total Pages | : 36 |
Release | : 2006 |
ISBN-10 | : OCLC:1290326150 |
ISBN-13 | : |
Rating | : 4/5 (50 Downloads) |
Book Synopsis Simulated Likelihood Estimation of Affine Term Structure Models from Panel Data by : Michael W. Brandt
Book excerpt: We show how to estimate affine term structure models from a panel of noisy bond yields using simulated maximum likelihood based on importance sampling. We approximate the likelihood function of the state-space representation of the model by correcting the likelihood function of a Gaussian first-order approximation for the non-normalities introduced by the affine factor dynamics. Depending on the accuracy of the correction, which is computed through simulations, the quality of the estimator ranges from quasi-maximum likelihood (no correction) to exact maximum likelihood as the simulation size grows.