scholarly journals MAXIMUM LIKELIHOOD ESTIMATION WITH DYNAMIC MEASUREMENT ERRORS AND APPLICATION TO INTEREST RATE MODELING

2016 ◽  
Vol 110 (3) ◽  
Author(s):  
M. Misiran
Keyword(s):  
Maximum Likelihood ◽  
Interest Rate ◽  
Maximum Likelihood Estimation ◽  
Measurement Errors ◽  
Likelihood Estimation ◽  
Dynamic Measurement

A NOTE ON FERGUSSON AND PLATEN: “APPLICATION OF MAXIMUM LIKELIHOOD ESTIMATION TO STOCHASTIC SHORT RATE MODELS”

2016 ◽  
Vol 11 (04) ◽  
pp. 1650018 ◽  
Author(s):  
LUCA VINCENZO BALLESTRA ◽  
GRAZIELLA PACELLI ◽  
DAVIDE RADI
Keyword(s):  
Maximum Likelihood ◽  
Interest Rate ◽  
Maximum Likelihood Estimation ◽  
Stochastic Models ◽  
Fisher Information Matrix ◽  
Information Matrix ◽  
Likelihood Estimation ◽  
Analytical Expression ◽  
Interesting Paper ◽  
Short Rate Models

In a very recent and interesting paper, Fergusson and Platen (2015) investigate the applicability of the maximum likelihood (ML) method for estimating the parameters of some of the most popular stochastic models for the short interest rate. One of the main results of this paper is the analytical expression of the so-called observed Fisher information matrix for the Vasicek model at the ML point. However, in such a matrix some entries are not derived correctly and one entry is left unspecified. In the following, we provide the correct analytical expression of that matrix.

scholarly journals APPLICATION OF MAXIMUM LIKELIHOOD ESTIMATION TO STOCHASTIC SHORT RATE MODELS

2015 ◽  
Vol 10 (02) ◽  
pp. 1550009 ◽  
Author(s):  
K. FERGUSSON ◽  
E. PLATEN
Keyword(s):  
Maximum Likelihood ◽  
Interest Rate ◽  
Maximum Likelihood Estimation ◽  
Closed Form ◽  
Transition Density ◽  
Likelihood Estimation ◽  
Interest Rate Models ◽  
Transition Density Function ◽  
Short Rate Models ◽  
Closed Form Formula

The application of maximum likelihood estimation is not well studied for stochastic short rate models because of the cumbersome detail of this approach. We investigate the applicability of maximum likelihood estimation to stochastic short rate models. We restrict our consideration to three important short rate models, namely the Vasicek, Cox–Ingersoll–Ross (CIR) and 3/2 short rate models, each having a closed-form formula for the transition density function. The parameters of the three interest rate models are fitted to US cash rates and are found to be consistent with market assessments.

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