MLEdensity_jointQ_sepSigma: Compute the maximum likelihood function ("joint Q" models for separate Sigma estimation)

Description

Compute the maximum likelihood function ("joint Q" models for separate Sigma estimation)

Usage

MLEdensity_jointQ_sepSigma(
  K1XQ,
  r0,
  SSZ,
  K0Z,
  K1Z,
  se,
  Gy.0,
  mat,
  Y,
  Z,
  P,
  Wpca,
  We,
  WpcaFull,
  dt,
  Economies,
  FactorLabels,
  ModelType,
  JLLinputs,
  nargout
)

Arguments

K1XQ: risk-neutral feedback matrix (NxN)
r0: long-run interest rate (scalar)
SSZ: variance-covariance matrix (KxK)
K0Z: intercept from the P-dynamics (Kx1)
K1Z: feedback matrix from the P-dynamics (KxK)
se: Variance of the portfolio of yields observed with error (scalar)
Gy.0: matrix of contemporaneous terms from the P-dynamics (KxK)
mat: vector of maturities (in years) of yields used in estimation (J x 1)
Y: matrix of yields used in estimation (J x T)
Z: complete set of spanned and unspanned factors (KxT)
P: complete set of spanned factors (NxT)
Wpca: matrix of weights of the portfolios observed without errors (NxJ)
We: matrix of weights of the portfolios observed with errors ((J-N)xJ)
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: Set of economies that are part of the economic system (vector of text)
FactorLabels: string-list based which contains the labels of all the variables present in the model
ModelType: feasible options are (i) "JLL original" or (ii) "JLL NoDomUnit"
JLLinputs: if the model chosen is the "JLL jointSigma", "JLLinputs" should be specified (see "JLL" function)
nargout: if nargout== 1: provides only the values of the likelihood; if nargout== 2: complete ATSM outputs

References

This function is an extended 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