A Hybrid Data Cloning Maximum Likelihood Estimator for Stochastic Volatility Models
In this paper we analyze a maximum likelihood estimator using data cloning for stochastic volatility models.This estimator is constructed using a hybrid methodology based on Integrated Nested Laplace Approximations to calculate analytically the auxiliary Bayesian estimators with great accuracy and computational efficiency, without requiring the use of simulation methods as Markov Chain Monte Carlo. We analyze the performance of this estimator compared to methods based in Monte Carlo simulations (Simulated Maximum Likelihood, MCMC Maximum Likelihood) and approximate maximum likelihood estimators using Laplace Approximations. The results indicate that this data cloning methodology achieves superior results over methods based on MCMC, and comparable to results obtained by the Simulated Maximum Likelihood estimator.
|Date of creation:||16 Mar 2012|
|Contact details of provider:|| Postal: Av. Pres. Wilson 118, 11 andar, Rio de Janeiro, RJ, Brazil, 20030-020|
Web page: http://professores.ibmecrj.br/erg/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stein, Elias M & Stein, Jeremy C, 1991. "Stock Price Distributions with Stochastic Volatility: An Analytic Approach," Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 727-752.
- Victor Chernozhukov & Han Hong, 2004. "Likelihood Estimation and Inference in a Class of Nonregular Econometric Models," Econometrica, Econometric Society, vol. 72(5), pages 1445-1480, 09.
- Mikhail Chernov & A. Ronald Gallant & Eric Ghysels & George Tauchen, 2002.
"Alternative Models for Stock Price Dynamics,"
CIRANO Working Papers
- Koopman, Siem Jan & Mallee, Max I. P. & Van der Wel, Michel, 2010. "Analyzing the Term Structure of Interest Rates Using the Dynamic Nelsonâ€“Siegel Model With Time-Varying Parameters," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(3), pages 329-343.
- Bates, David S, 1996. "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 69-107.
- Rolf Poulsen & Klaus Reiner Schenk-Hoppe & Christian-Oliver Ewald, 2009. "Risk minimization in stochastic volatility models: model risk and empirical performance," Quantitative Finance, Taylor & Francis Journals, vol. 9(6), pages 693-704.
- Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
When requesting a correction, please mention this item's handle: RePEc:ibr:dpaper:2012-02. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Márcio Laurini)
If references are entirely missing, you can add them using this form.