An Efficient Method for Maximum Likelihood Estimation of a Stochastic Volatility Model

• Main Authors: HUANG, Junying, Shirley, YU, Jun
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2008
• Subjects: Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1540; https://ink.library.smu.edu.sg/context/lkcsb_research/article/2539/viewcontent/efficientmethod.pdf
• Institution: Singapore Management University

In this paper an efficient, simulation-based, maximumlikelihood (ML) method is proposed for estimating Taylor’sstochastic volatility (SV) model. The new method isbased on the second order Taylor approximation to the integrand.The approximation enables us to transfer the numericalproblem in the Lapla...