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4.1 Given the observations of {X, } at n = 0, 1, ..., N: Xo = To, X1 = $1, . ..XN = In, we
4.1 Given the observations of {X, } at n = 0, 1, ..., N: Xo = To, X1 = $1, . ..XN = In, we would like to use Maximum Likelihood Estimation (MLE) to estimate the parameters k, 0, 5. Please derive the log-likelihood corresponding function.Given the the following model for the evolution of stock price { X, }nEN: Xn = ek-go toEn (X_1 + ko) (5) where k, 0, o > 0 are constants, and { En ner are i.i.d. standard normal random variables
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