TY  - JOUR
AU  - Aït-Sahalia,Yacine
AU  - Kimmel,Robert
TI  - Estimating Affine Multifactor Term Structure Models Using Closed-Form Likelihood Expansions
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 286
PY  - 2002
Y2  - December 2002
UR  - http://www.nber.org/papers/t0286
L1  - http://www.nber.org/papers/t0286.pdf
N1  - Author contact info:
Yacine Ait-Sahalia
Department of Economics
Fisher Hall
Princeton University
Princeton, NJ 08544-1021
Tel: 609/258-4015
Fax: 609/258-0719
E-Mail: yacine@princeton.edu

Robert Kimmel
Ohio State University
E-Mail: kimmel_42@cob.osu.edu
AB  - We develop and implement a technique for closed-form maximum likelihood estimation (MLE) of multifactor affine yield models. We derive closed-form approximations to likelihoods for nine Dai and Singleton (2000) affine models. Simulations show our technique very accurately approximates true (but infeasible) MLE. Using US Treasury data, we estimate nine affine yield models with different market price of risk specifications. MLE allows non-nested model comparison using likelihood ratio tests; the preferred model depends on the market price of risk. Estimation with simulated and real data suggests our technique is much closer to true MLE than Euler and quasi-maximum likelihood (QML) methods. 
ER  -