Skip to main content
Journal cover image

Simulated likelihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets

Publication ,  Journal Article
Brandt, MW; Santa-Clara, P
Published in: Journal of Financial Economics
January 30, 2002

We present an econometric method for estimating the parameters of a diffusion model from discretely sampled data. The estimator is transparent, adaptive, and inherits the asymptotic properties of the generally unattainable maximum likelihood estimator. We use this method to estimate a new continuous-time model of the joint dynamics of interest rates in two countries and the exchange rate between the two currencies. The model allows financial markets to be incomplete and specifies the degree of incompleteness as a stochastic process. Our empirical results offer several new insights into the dynamics of exchange rates. © 2002 Elsevier Science B.V. All rights reserved.

Duke Scholars

Altmetric Attention Stats
Dimensions Citation Stats

Published In

Journal of Financial Economics

DOI

ISSN

0304-405X

Publication Date

January 30, 2002

Volume

63

Issue

2

Start / End Page

161 / 210

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1606 Political Science
  • 1502 Banking, Finance and Investment
  • 1402 Applied Economics
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Brandt, M. W., & Santa-Clara, P. (2002). Simulated likelihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets. Journal of Financial Economics, 63(2), 161–210. https://doi.org/10.1016/S0304-405X(01)00093-9
Brandt, M. W., and P. Santa-Clara. “Simulated likelihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets.” Journal of Financial Economics 63, no. 2 (January 30, 2002): 161–210. https://doi.org/10.1016/S0304-405X(01)00093-9.
Brandt MW, Santa-Clara P. Simulated likelihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets. Journal of Financial Economics. 2002 Jan 30;63(2):161–210.
Brandt, M. W., and P. Santa-Clara. “Simulated likelihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets.” Journal of Financial Economics, vol. 63, no. 2, Jan. 2002, pp. 161–210. Scopus, doi:10.1016/S0304-405X(01)00093-9.
Brandt MW, Santa-Clara P. Simulated likelihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets. Journal of Financial Economics. 2002 Jan 30;63(2):161–210.
Journal cover image

Published In

Journal of Financial Economics

DOI

ISSN

0304-405X

Publication Date

January 30, 2002

Volume

63

Issue

2

Start / End Page

161 / 210

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1606 Political Science
  • 1502 Banking, Finance and Investment
  • 1402 Applied Economics