Vasicek Estimation

raffapi · October 8th, 2004, 7:18 am

What is the correct way to estimate the parameters of the diffusion process in Vasicek?

raffapi · October 8th, 2004, 7:19 am

Thank you

Brown · October 8th, 2004, 7:43 am

Depends what you want to do:- pricing derivatives: calibrate to market quotations-forecasting: OLS: though I doubt the results of the OLS will withstand the classic significance tests.

raffapi · October 8th, 2004, 8:49 am

I want to obtain the yield curve.

AndreaClaudia · October 20th, 2004, 5:32 pm

Hi!Try a Kalman Filter approach and do MLE.It's very easy for the Vasicek model!Hope this helps!