Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction costs. To find optimal strategies that determine optimally...

In many credit risk and pricing applications, credit transition matrix is modeled by a constant transition probability or generator matrix for Markov processes. Based on empirical evidence, we model rating transition processes as piecewise homogeneous Markov chains with unobserved structural...

The complexity of estimating multivariate GARCH models increases significantly with the increase in the number of asset series. To address this issue, we propose a general regularization framework for high-dimensional GARCH models with BEKK representations, and obtain a penalized quasi-maximum...

Inspired by the wide adoption of rigorous randomized controlled trials (RCTs) in medical research, economists and other social scientists have increasingly used RCTs in their research. As researchers pick up projects amenable to the RCT methodology, they likely leave out important questions to...

Many models of semiparametric multivariate survival functions are characterized by nonparametric marginal survival functions and parametric copula functions, where different copulas imply different dependence structures. This paper considers estimation and model selection for these...

Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction costs. To find optimal strategies that determine optimally...

This paper studies inter-trade durations in the NASDAQ limit order market and finds that inter-trade durations in ultra-high frequency have two modes. One mode is to the order of approximately 10^{-4} seconds, and the other is to the order of 10^0 seconds. This phenomenon and other empirical...

This paper considers the problem of European option pricing in the presence of proportional transaction costs when the price of the underlying follows a jump diffusion process. Using an approach that is based on maximization of the expected utility of terminal wealth, we transform the option...