I know it's common to say there is no need to JADE, but in my experience, the surest way to annoy the person is to say no, and when they ask why say some version of because I said no without giving a reason.
Here, you can give a number of legitimate reasons. For example, your room isn't childproof, there are numerous breakable objects that might hurt a toddler, and perhaps most importantly, she isn't potty trained, e.g. taking off her wet pull up and sitting bare bottomed on the couch. Suggesting an alternative might help, for example, how about her sleeping on the sofa in the lounge or in your parent's bed if they want her to spend the night.
If they argued, snarky me would say that if she has an accident in my bed, I will visit the parent's home and have a similar one in their bed, but that is almost certainly rude.