Publication Type

Journal Article

Publication Date

2002

Abstract

The stochastic volatility model has no closed form for its likelihood and hence the maximum likelihood estimation method is difficult to implement. However, it can be shown that the model has a known characteristic function. As a consequence, the model is estimable via the empirical characteristic function. In this paper, the characteristic function of the model is derived and the estimation procedure is discussed. An application is considered for daily returns of Australian/New Zealand dollar exchange rate. Model checking suggests that the stochastic volatility model together with the empirical characteristic function estimates fit the data well.

Discipline

Economics

Research Areas

Econometrics

Publication

Australian and New Zealand Journal of Statistics

Volume

44

Issue

3

First Page

319

Last Page

335

ISSN

1369-1473

Identifier

10.1111/1467-842x.00234

Publisher

Wiley

Additional URL

http://dx.doi.org/10.1111/1467-842x.00234

Included in

Economics Commons

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