Estimation of Equicorrelated Diffusions from Incomplete Data

Peer reviewed: 
No, item is not peer reviewed.
Scholarly level: 
Faculty/Staff
Date created: 
2011
Keywords: 
Maximum likelihood
Equicorrelation
Wiener process
Missing data
Abstract: 

The paper derives maximum likelihood parameter estimators for symmetrically correlated Weiner processes observed at discrete intervals. Such processes arise when pricing and determining Value-at-Risk for portfolio derivatives. Cases of driftless and mean-reverting state variables are considered. The procedure is applicable to samples with missing data of any pattern and to high dimensional systems. The estimation procedure is illustrated using a sample of stock prices.

Language: 
English
Document type: 
Report
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