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Maximization by parts in extremum estimation
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Fan, Yanqin, Pastorello, Sergio and Renault, Eric (2015) Maximization by parts in extremum estimation. The Econometrics Journal, 18 (2). pp. 147-171. doi:10.1111/ectj.12046 ISSN 1368-4221.
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Official URL: http://dx.doi.org/10.1111/ectj.12046
Abstract
In this paper, we present various iterative algorithms for extremum estimation in cases where direct computation of the extremum estimator or via the Newton–Raphson algorithm is difficult, if not impossible. While the Newton–Raphson algorithm makes use of the full Hessian matrix, which may be difficult to evaluate, our algorithms use parts of the Hessian matrix only, the parts that are easier to compute. We establish consistency and asymptotic efficiency of our iterative estimators under regularity and information dominance conditions. We argue that the economic interpretation of a structural econometric model will often allow us to give credibility to a well‐suited information dominance condition. We apply our algorithms to the estimation of the Merton structural credit risk model and to the Heston stochastic volatility option pricing model.
Item Type: | Journal Article | ||||||
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Divisions: | Faculty of Social Sciences > Economics | ||||||
Journal or Publication Title: | The Econometrics Journal | ||||||
Publisher: | Oxford University Press | ||||||
ISSN: | 1368-4221 | ||||||
Official Date: | 25 June 2015 | ||||||
Dates: |
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Volume: | 18 | ||||||
Number: | 2 | ||||||
Page Range: | pp. 147-171 | ||||||
DOI: | 10.1111/ectj.12046 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Access rights to Published version: | Restricted or Subscription Access |
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