Download or read book Simulated Likelihood Estimation of Affine Term Structure Models from Panel Data written by Michael W. Brandt and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show how to estimate affine term structure models from a panel of noisy bond yields using simulated maximum likelihood based on importance sampling. We approximate the likelihood function of the state-space representation of the model by correcting the likelihood function of a Gaussian first-order approximation for the non-normalities introduced by the affine factor dynamics. Depending on the accuracy of the correction, which is computed through simulations, the quality of the estimator ranges from quasi-maximum likelihood (no correction) to exact maximum likelihood as the simulation size grows.