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Estimating stochastic volatility models: a comparison of two importance samplers. (English) Zbl 1081.91534

Summary: In this paper, we describe and compare two simulated Maximum Likelihood estimation methods for a basic stochastic volatility model. For both methods, the likelihood function is estimated using importance sampling techniques. Based on a Monte Carlo study, we assess which method is more effective. Further, we validate the two methods using diagnostic importance sampling test procedures. Stochastic volatility models with Gaussian and Student-t distributed disturbances are considered.

MSC:

91B28 Finance etc. (MSC2000)
93E11 Filtering in stochastic control theory
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