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Gaussian Estimation of One-Factor Mean Reversion Processes

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  • Freddy H. Marín Sánchez
  • J. Sebastian Palacio

Abstract

We propose a new alternative method to estimate the parameters in one-factor mean reversion processes based on the maximum likelihood technique. This approach makes use of Euler-Maruyama scheme to approximate the continuous-time model and build a new process discretized. The closed formulas for the estimators are obtained. Using simulated data series, we compare the results obtained with the results published by other authors.

Suggested Citation

  • Freddy H. Marín Sánchez & J. Sebastian Palacio, 2013. "Gaussian Estimation of One-Factor Mean Reversion Processes," Journal of Probability and Statistics, Hindawi, vol. 2013, pages 1-10, October.
    • Handle: RePEc:hin:jnljps:239384
    DOI: 10.1155/2013/239384
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    Cited by:

    1. Deeney, Peter & Cummins, Mark & Heintz, Katharina & Pryce, Mary T., 2021. "A real options based decision support tool for R&D investment: Application to CO2 recycling technology," European Journal of Operational Research, Elsevier, vol. 289(2), pages 696-711.

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