Linear stochastic dierential equations (SDE) are expressed as an exactdiscrete model (EDM) and estimated with structural equation models(SEM) and the Kalman lter (KF) algorithm. The SEM likelihood is welldened even for the times series case and the SEM and KF approach yieldthe same likelihood....

"This volume introduces simple mathematical models of financial markets, focussing on the problems of pricing and hedging risky financial instruments whose price evolution depends on the prices of other risky assets, such as stocks or commodities. Over the past four decades trading in these...