Quasi maximum likelihood estimation and inference in multivariate volatility models remains a challenging computational task if, for example, the dimension is high. One of the reasons is that typically numerical procedures are used to compute the score and the Hessian, and often they are numerically unstable. We provide analytical formulae for the score and the Hessian and show in a simulation study that they clearly outperform numerical methods. As an example, we use the popular BEKK-GARCH model, for which we derive first and second order derivatives.

Econometric Institute Research Papers
Erasmus School of Economics

Hafner, C., & Herwartz, H. (2003). Analytical quasi maximum likelihood inference in multivariate volatility models (No. EI 2003-21). Econometric Institute Research Papers. Retrieved from http://hdl.handle.net/1765/1721