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Keywords:

  • Diffusion;
  • Quasi-maximum likelihood estimator;
  • Wagner–Platen approximation

Summary  This paper introduces a quasi-maximum likelihood estimator for discretely observed diffusions when a closed-form transition density is unavailable. Higher-order Wagner–Platen strong approximation is used to derive the first two conditional moments and a normal density function is used in estimation. Simulation study shows that the proposed estimator has high numerical precision and good numerical robustness. This method is applicable to a large class of diffusions.