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Estimating structural bond pricing models via simulated maximum likelihood

Bruche, Max (2005) Estimating structural bond pricing models via simulated maximum likelihood. Discussion paper, 534. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Abstract

This paper describes how structural bond pricing models can be estimated using a Simulated Maximum Likelihood procedure developed by Durbin and Koopman (1997). The approach has the advantage that price dated on any traded claim (such as bonds, equity, and credit default swaps), as well as information about the balance sheet (e.g. accounting data) can be used in the estimation, improving efficiency. Monte Carlo evidence as well as a small application to real data indicates that this approach is superior to both traditional estimation methods and recently proposed versions of Maximum Likelihood Estimation (Ericsson, Reneby 2002)

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2005 The Author
Library of Congress subject classification: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 534
Date Deposited: 29 Jul 2009 11:31
URL: http://eprints.lse.ac.uk/24647/

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