Analytic derivatives for estimation of linear dynamic models (Q1825566)

This paper develops two algorithms. Algorithm 1 computes the exact Gaussian log-likelihood function, its exact gradient vector, and an asymptotic approximation of its Hessian matrix, for discrete-time, linear, dynamic models in state-space form. Algorithm 2, derived from Algorithm 1, computes the exact sample, information matrix of this likelihood function. The computed quantities are analytic (not numerical approximations) and should, therefore, be useful for reliably, quickly, and accurately: (i) checking local identifiability of parameters by checking the rank of the information matrix; (ii) using the gradient vector and Hessian matrix to compute maximum likelihood estimates of parameters with Newton methods; and, (iii) computing asymptotic covariances (Cramér-Rao bounds) of the parameter estimates with the Hessian or the information matrix.