Likelihood-Related Estimation Methods and Non-Gaussian GARCH Processes
AbstractThis article discusses the finite distance properties of three likelihood-based estimation strategies for GARCH processes with non-Gaussian conditional distributions : (1) the maximum likelihood approach ; (2) the Quasi maximum Likelihood approach ; (3) a multi-steps recursive estimation approach (REC). We first run a Monte Carlo test which shows that the recursive method may be the most relevant approach for estimation purposes. We then turn to a sample of SP500 returns. We confirm that the REC estimates are statistically dominating the parameters estimated by the two other competing methods. Regardless of the selected model, REC estimates deliver the more stable results.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 10067.
Length: 34 pages
Date of creation: Jul 2010
Date of revision:
Maximum likelihood method; related-GARCH process; recursive estimation method; mixture of Gaussian distributions; generalized hyperbolic distributions; SP500.;
Other versions of this item:
- Christophe Chorro & Dominique Guegan & Florian Ielpo, 2010. "Likelihood-Related Estimation Methods and Non-Gaussian GARCH Processes," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00523371, HAL.
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-30 (All new papers)
- NEP-ETS-2010-10-30 (Econometric Time Series)
- NEP-ORE-2010-10-30 (Operations Research)
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- Dominique Guegan & Florian Ielpo & Hanjarivo Lalaharison, 2011.
"Option pricing with discrete time jump processes,"
Documents de travail du Centre d'Economie de la Sorbonne
11037, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Dominique Guegan & Florian Ielpo & Hanjarivo Lalaharison, 2012. "Option pricing with discrete time jump processes," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00611706, HAL.
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