MLEdensity function

Compute the maximum likelihood function of all models

MLEdensity(
  K1XQ,
  r0,
  SSZ,
  K0Z,
  K1Z,
  se,
  Gy.0,
  mat,
  Y,
  Z,
  P,
  Wpca,
  We,
  WpcaFull,
  dt,
  Economies,
  FactorLabels,
  ModelType,
  GVARinputs = NULL,
  JLLinputs = NULL,
  BS_outputs = FALSE,
  nargout
)

Arguments

• K1XQ: risk-neutral feedback matrix (N x N or CN x CN)
• r0: long-run interest rate (scalar or vector with length C)
• SSZ: variance-covariance matrix (F x F)
• K0Z: intercept from the P-dynamics (F x 1)
• K1Z: feedback matrix from the P-dynamics (F x F)
• se: Variance of the portfolio of yields observed with error (scalar). Default is set to NULL.
• Gy.0: matrix of contemporaneous terms from the P-dynamics (F x F)
• mat: vector of maturities (in years) of yields used in estimation (J x 1)
• Y: matrix of yields used in estimation (J x T or CJ x T)
• Z: complete set of spanned and unspanned factors (F x T)
• P: complete set of spanned factors (N x T or CN x T)
• Wpca: matrix of weights of the portfolios observed without errors (N x J or CN x J)
• We: matrix of weights of the portfolios observed with errors ((J-N) x J or C(J-N) x CJ)
• WpcaFull: composite matrix of weights the portfolios observed with and without errors
• dt: time interval unit of the model (scalar). For instance, if data is (i) monthly, dt <- 12; (ii) quarterly, dt <- 4; (iii) yearly, dt <- 1.
• Economies: string-vector containing the names of the economies which are part of the economic system
• FactorLabels: string-list based which contains the labels of all the variables present in the model
• ModelType: string-vector containing the label of the model to be estimated
• GVARinputs: if the model chosen is the "GVAR single" or "GVAR multi", the "GVARinputs" should be specified (see "GVAR" function)
• JLLinputs: if the model chosen is JLL-based. "JLLinputs" should contain (i) DomUnit, (ii) WishSigmas, (iii) SigmaNonOrtho, (iv) JLLModelType (See JLL function)
• BS_outputs: Generates simplified output list in the bootstrap setting. Default is set to FALSE.
• nargout: if nargout == 1: provides only the values of the likelihood; if nargout == 2: complete ATSM outputs

References

This function is modified version of the "A0N_MLEdensity_WOE" function by Le and Singleton (2018).

"A Small Package of Matlab Routines for the Estimation of Some Term Structure Models."

(Euro Area Business Cycle Network Training School - Term Structure Modelling). Available at: https://cepr.org/40029