Identification And Estimation Of Gaussian Affine Term Structure Models

Download or read book Identification and estimation of Gaussian affine term structure models written by James D. Hamilton and published by . This book was released on 2012 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops new results for identification and estimation of Gaussian affine term structure models. We establish that three popular canonical representations are unidentified, and demonstrate how unidentified regions can complicate numerical optimization. A separate contribution of the paper is the proposal of minimum-chi-square estimation as an alternative to MLE. We show that, although it is asymptotically equivalent to MLE, it can be much easier to compute. In some cases, MCSE allows researchers to recognize with certainty whether a given estimate represents a global maximum of the likelihood function and makes feasible the computation of small-sample standard errors.