Pseudo Maximum Likelihood Methods: Theory

Gouriéroux, Christian; Monfort, Alain; Trognon, Alain

doi:10.2307/1913471

Cited by 1,181 publications

(585 citation statements)

References 7 publications

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“…The transformation is used to impose the restrictions b < 0, d > 0, and k > 0. Even though (4) is not the true log-likelihood (in presence of storage, prices will not be distributed normally), the estimates are consistent (Gourieraux, Monfort, and Trognon 1984).…”

Section: The Model and The Estimation Proceduresmentioning

confidence: 89%

The empirical relevance of the competitive storage model

Cafiero

et al. 2011

Journal of Econometrics

102

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"The empirical relevance of models of competitive storage arbitrage in explaining commodity price behavior has been seriously challenged in a series of pathbreaking papers by Deaton and Laroque (1992, 1995, 1996). Here we address their major criticism, that the model is in general unable to explain the degree of serial correlation observed in prices of twelve major commodities. First, we present a simple numerical version of their model which, contrary to Deaton and Laroque (1992), can generate the high levels of serial correlation observed in commodity prices, if it is parameterized to generate realistic levels of price variation. Then, after estimating the Deaton and Laroque (1995, 1996) model using their data set, model specification and econometric approach, we show that use of a much finer grid to approximate the equilibrium price function yields quite different estimates for most commodities. Results are obtained for coffee, copper, jute, maize, palm oil, sugar and tin that support the specifications of the storage model with positive constant marginal storage cost and no deterioration as in Gustafson (1958a). Consumption demand has low response to price and, except for sugar, there are infrequent stockouts. Observed magnitudes of serial correlation of price match those implied by the estimated model." [author's abstract

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Section: The Model and The Estimation Proceduresmentioning

confidence: 89%

The empirical relevance of the competitive storage model

Cafiero

et al. 2011

Journal of Econometrics

102

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“…Normality allows us to estimate the factors using the Kalman filter as well as the parameters using the corresponding error prediction decomposition (see Harvey, 1992). Using pseudo-maximum likelihood (PML) arguments in an exponential family setting, the estimates are consistent, though not efficient, under distributional misspecification as long as the conditional means are correctly specified (see Gouriéroux, Monfort, and Trognon, 1984). In the second step, we estimate the variance-covariance matrix based on the updated Kalman filter residuals,…”

Section: A State-space Model For Bid and Ask Returnsmentioning

confidence: 99%

The impact of macroeconomic news on quote adjustments, noise, and informational volatility

Hautsch

Hess

Veredas

2011

Journal of Banking & Finance

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“…Equations (7) and (8) are estimated by Quasi Maximum Likelihood (QML) (Gourieroux et al (1984)) using the BHHH algorithm (Berndt et al (1974)). …”

Section: Figure 7: Smoothed Gaussian Kernel Distribution Of Daily Retmentioning

confidence: 99%

On the Realized Volatility of the ECX CO2 Emissions 2008 Futures Contract: Distribution, Dynamics and Forecasting

Chevallier

Sévi

2009

SSRN Journal

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Abstract:The recent implementation of the EU Emissions Trading Scheme (EU ETS) in January 2005 created new financial risks for emitting firms. To deal with these risks, options are traded since October 2006. Because the EU ETS is a new market, the relevant underlying model for option pricing is still a controversial issue. This article improves our understanding of this issue by characterizing the conditional and unconditional distributions of the realized volatility for the 2008 futures contract in the European Climate Exchange (ECX), which is valid during Phase II (2008)(2009)(2010)(2011)(2012) of the EU ETS. The realized volatility measures from naive, kernel-based and subsampling estimators are used to obtain inferences about the distributional and dynamic properties of the ECX emissions futures volatility. The distribution of the daily realized volatility in logarithmic form is shown to be close to normal. The mixture-of-distributions hypothesis is strongly rejected, as the returns standardized using daily measures of volatility clearly departs from normality. A simplified HAR-RV model (Corsi, 2009) with only a weekly component, which reproduces long memory properties of the series, is then used to model the volatility dynamics. Finally, the predictive accuracy of the HAR-RV model is tested against GARCH specifications using one-step-ahead forecasts, which confirms the HAR-RV superior ability. Our conclusions indicate that (i) the standard Brownian motion is not an adequate tool for option pricing in the EU ETS, and (ii) a jump component should be included in the stochastic process to price options, thus providing more efficient tools for risk-management activities.JEL Classification: C5, G1, Q4.

show abstract

Pseudo Maximum Likelihood Methods: Theory

Cited by 1,181 publications

References 7 publications

The empirical relevance of the competitive storage model

The empirical relevance of the competitive storage model

The impact of macroeconomic news on quote adjustments, noise, and informational volatility

On the Realized Volatility of the ECX CO2 Emissions 2008 Futures Contract: Distribution, Dynamics and Forecasting

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