Kleppe, Tore Selland; Yu, Jun; Skaug, Hans J. - School of Economics, Singapore Management University - 2010
A new algorithm is developed to provide a simulated maximum likelihood estimation of the GARCH diffusion model of Nelson (1990) based on return data only. The method combines two accurate approximation procedures, namely, the polynomial expansion of Aït-Sahalia (2008) to approximate the...