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Maximum Likelihood Estimation Using Price Data Of The Derivative Contract

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  • Jin-Chuan Duan

Abstract

This article develops a general methodology that uses the observed prices of a derivative contract to compute maximum likelihood parameter estimates for an unobserved asset value process. the use of this estimation methodology is demonstrated in two applications: Vasicek's term structure model and deposit insurance pricing. This methodology can also be useful in the empirical analysis of complex financial contracts involving embedded options. Copyright 1994 Blackwell Publishers.

Suggested Citation

  • Jin-Chuan Duan, 1994. "Maximum Likelihood Estimation Using Price Data Of The Derivative Contract," Mathematical Finance, Wiley Blackwell, vol. 4(2), pages 155-167.
  • Handle: RePEc:bla:mathfi:v:4:y:1994:i:2:p:155-167
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9965.1994.tb00055.x
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    References listed on IDEAS

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    1. Erhan Bayraktar & Michael Ludkovski, 2014. "Liquidation In Limit Order Books With Controlled Intensity," Mathematical Finance, Wiley Blackwell, pages 627-650.
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    9. repec:dau:papers:123456789/7391 is not listed on IDEAS
    10. Jim Gatheral, 2010. "No-dynamic-arbitrage and market impact," Quantitative Finance, Taylor & Francis Journals, pages 749-759.
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