Publication

Jul 2012

Maximum likelihood estimation of discretely observed diffusion processes is mostly hampered by the lack of a closed form solution of the transient density. In this paper the author expands extant work on univariate diffusions to higher dimensions. After providing evidence for the efficiency of a numerical approach, the authors illustrate its application for the estimation of a joint system of short-run and medium run investor sentiment and asset price dynamics using German stock market data.

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Author Thomas Lux
Series Kiel Institute Working Papers
Issue 1781
Publisher Kiel Institute for the World Economy
Copyright © 2012 Kiel Institute for the World Economy
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