Maximum Likelihood Estimation - the Ornstein-Uhlenbeck Process(part 2)

In part one, we looked at the method of maximum likelihood estimation in the context of the normal distribution. Keeping with the theme of this channel, we also showed how to calculate these parameters numerically if one cannot derive an analytical solution. In the video, we look at using maximum likelihood estimation for extracting the parameters where our random variable follows an Ornstein-Uhlenbeck process. We will look at some simulated data and extract the parameters numerically. Since these videos will eventually lead to parameter analysis for mean-reverting pairs trades, we will also compare our answers with the results given analytically in the book, Optimal Mean Reverting Trading mentioned in the description of part one.

Github: https://github.com/kpmooney/numerical_methods_youtube/blob/master/ornstein_uhlenbeck/Max%20Likelihood.ipynb

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