Watanabe, Toshiaki - In: Journal of Applied Econometrics 14 (1999) 2, pp. 101-21
This paper develops a new method for the analysis of stochastic volatility (SV) models. Since volatility is a latent variable in SV models, it is difficult to evaluate the exact likelihood. In this paper, a non-linear filter which yields the exact likelihood of SV models is employed. Solving a...