A structural equation model (SEM) with deterministic intercepts isintroduced. The gaussian likelihood function does not contain determinantsof sample moment matrices and is thus well dened for only onestatistical unit. The SEM is applied to the dynamic state space model andcompared with the...

A new method for pricing contingent claims based on an asymptotic expansion of the dynamics of the pricing density is introduced. The expansion is conducted in a preferred coordinate frame, in which the pricing density looks stationary. The resulting asymptotic Kolmogorov-backward-equation is...