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## Details

Material Type: | Document, Internet resource |
---|---|

Document Type: | Internet Resource, Computer File |

All Authors / Contributors: |
Yacine Aït-Sahalia; Robert Kimmel; National Bureau of Economic Research. |

OCLC Number: | 56547228 |

Notes: | "June 2004." |

Description: | 1 online resource (42 pages) : illustrations. |

Series Title: | Working paper series (National Bureau of Economic Research), no. 10579. |

Responsibility: | Yacine Ait-Sahalia, Robert Kimmel. |

### Abstract:

"We develop and implement a new method for maximum likelihood estimation in closed-form of stochastic volatility models. Using Monte Carlo simulations, we compare a full likelihood procedure, where an option price is inverted into the unobservable volatility state, to an approximate likelihood procedure where the volatility state is replaced by the implied volatility of a short dated at-the-money option. We find that the approximation results in a negligible loss of accuracy. We apply this method to market prices of index options for several stochastic volatility models, and compare the characteristics of the estimated models. The evidence for a general CEV model, which nests both the affine model of Heston (1993) and a GARCH model, suggests that the elasticity of variance of volatility lies between that assumed by the two nested models"--National Bureau of Economic Research web site.

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