Approximated maximum likelihood estimation in multifractal random walks.

@article{Lvsletten2012ApproximatedML,
  title={Approximated maximum likelihood estimation in multifractal random walks.},
  author={Ola L{\o}vsletten and Martin Rypdal},
  journal={Physical review. E, Statistical, nonlinear, and soft matter physics},
  year={2012},
  volume={85 4 Pt 2},
  pages={
          046705
        }
}
We present an approximated maximum likelihood method for the multifractal random walk processes of [E. Bacry et al., Phys. Rev. E 64, 026103 (2001)]. The likelihood is computed using a Laplace approximation and a truncation in the dependency structure for the latent volatility. The procedure is implemented as a package in the r computer language. Its performance is tested on synthetic data and compared to an inference approach based on the generalized method of moments. The method is applied to… CONTINUE READING

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