Quasi‐maximum likelihood estimation of discretely observed diffusions
Xiao Huang · Econometrics Journal · 2011
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.