Indirect estimation of stochastic differential equation models: some computational experiments

✍ Scribed by Carlo Bianchi; Eugene M. Cleur

• Publisher: Springer US
• Year: 1996
• Tongue: English
• Weight: 895 KB
• Volume: 9
• Category: Article
• ISSN: 1572-9974
• DOI: 10.1007/bf00121638

✦ Synopsis

In this paper we consider the estimation of some stochastic differential equation models by an indirect estimation method proposed by Gourieroux, Monfort and Renault (1993) using discrete data. The performance of this method is analysed via Monte Carlo experiments. In particular we examine the Vasicek and the Cox, Ingersoll and Ross models used in financial economics and a system of three stochastic differential equations proposed by P.C.B. Phillips in 1972. These results show the ability of indirect estimation to remove the bias resulting from the discretisation of the continuous model.