• Communications for Statistical Applications and Methods
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• v.17 no.4
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• pp.599-609
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• 2010

Many of financial data are explained via diffusion models in modern financial research. Various types of estimation methods of diffusion processes were suggested by many authors. In this paper, we tested the properties of the NLL estimation method, suggested by Shoji and Ozaki (1998), of diffusion processes in the view of the bias and variance of the estimators and applied the method to estimate the model parameters for the U.S. fedral funds rate data and Korean inter-bank exchange rate data. By simulation study we showed that the NLL method provides relatively good estimators, in the meaning that the estimator has less bias than the Euler method, while keeping the variance similar level. We also provide the NLL estimates of U.S fedral funds rate data and Korean inter-bank exchange rate data.