Maximum likelihood estimation
FRM Part 1 glossary · Financial Risk Manager: Part I
Definition
Choosing parameter values that maximize the probability or density of the observed sample under the assumed model.
Maximum likelihood estimation in plain English
MLE is widely used for volatility and credit models, but its quality depends on correct specification and numerical stability.
Sign up free: all 170 FRM Part 1 terms as flashcards, plus practice questions with full explanations →
FRM Part 1 practice questions · FRM Part 1 flashcards · FRM Part 1 study guide