Estimates the parameters of the Vasicek model.

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Description

Loglikelihood for the Vasicek model

dr = alpha(beta-r)dt + sigma dW

with market price of risk q(r) = q1 +q2 r. The time scale is in years and the units are percentages.

Usage

1
LogLikVasicek( theta, R, tau, days, n)

Arguments

theta

Vector of parameters: (alpha,beta,sigma,q1,q2).

R

Observed returns.

tau

Maturities.

days

Number of days in a year.

n

Length of the time series.

Value

LL

-1 x Log-likelihood (to be minimized).

Note

Translated from Matlab by David-Shaun Guay (HEC Montreal grant).

Author(s)

Bruno Remillard

References

Chapter 5 of 'Statistical Methods for Financial Engineering, B. Remillard, CRC Press, (2013).