We develop and implement a technique for closed-form maximum likelihood estimation (MLE) of multifactor affine yield models. We derive closed-form approximations to likelihoods for nine Dai and Singleton (2000) affine models. Simulations show our technique very accurately approximates true (but...

We develop and implement a new method for maximum likelihood estimation in closed-form of stochastic volatility models. Using Monte Carlo simulations, we compare a full likelihood procedure, where an option price is inverted into the unobservable volatility state, to an approximate likelihood...

We develop and implement a technique for maximum likelihood estimation in closed-form of multivariate affine yield models of the term structure of interest rates. We derive closed-form approximations to the likelihood functions for all nine of the Dai and Singleton (2000) canonical affine models...

Dai and Singleton (2000) study a class of term structure models for interest rates that specify the instantaneous interest rate as an affine combination of the components of an N-dimensional affine diffusion process. Observable quantities of such models are invariant under regular affine...

Many applications in financial economics require calculation of conditional moments or contingent claims prices, but such expressions are known in closed-form for only a few specific models. We develop a method for approximation of such quantities, using power series, for a large class of...

Finding conditional moments and derivative prices is a common application in continuous-time financial economics, but these quantities are known in closed-form only for a few specific models. Recent research identifies a large class of models for which solutions to such problems have convergent...