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Testing for Unit Roots in the Presence of a Possible Break in Trend and Non-Stationary Volatility

Cavaliere, Giuseppe; Harvey, David I.; Leybourne, Stephen J. - School of Economics and Management, University of Aarhus - 2008

In this paper we analyse the impact of non-stationary volatility on the recently developed unit root tests which allow for a possible break in trend occurring at an unknown point in the sample, considered in Harris, Harvey, Leybourne and Taylor (2008) [HHLT]. HHLT's analysis hinges on a new...

Persistent link: https://www.econbiz.de/10005114134

Option Pricing using Realized Volatility

Stentoft, Lars - School of Economics and Management, University of Aarhus - 2008

In the present paper we suggest to model Realized Volatility, an estimate of daily volatility based on high frequency data, as an Inverse Gaussian distributed variable with time varying mean, and we examine the joint properties of Realized Volatility and asset returns. We derive the appropriate...

Persistent link: https://www.econbiz.de/10005440036

Volatility Components, Affine Restrictions and Non-Normal Innovations

Christoffersen, Peter; Dorion, Kris; Wang, Yintian - School of Economics and Management, University of Aarhus - 2008

Recent work by Engle and Lee (1999) shows that allowing for long-run and short-run components greatly enhances a GARCH … valuation performance of the Engle-Lee model and compare it to the standard one-component GARCH(1,1) model. We also compare … these non-affine GARCH models to one- and two- component models from the class of affine GARCH models developed in Heston …

Persistent link: https://www.econbiz.de/10005440037

Option Valuation with Long-run and Short-run Volatility Components

Christoffersen, Peter; Jacobs, Kris; Ornthanalai, Chayawat - School of Economics and Management, University of Aarhus - 2008

This paper presents a new model for the valuation of European options, in which the volatility of returns consists of two components. One of these components is a long-run component, and it can be modeled as fully persistent. The other component is short-run and has a zero mean. Our model can be...

Persistent link: https://www.econbiz.de/10005440047

Parameterizing unconditional skewness in models for financial time series

He, Changli; Silvennoinen, Annastiina; Teräsvirta, Timo - School of Economics and Management, University of Aarhus - 2008

In this paper we consider the third-moment structure of a class of time series models. It is often argued that the marginal distribution of financial time series such as returns is skewed. Therefore it is of importance to know what properties a model should possess if it is to accommodate...

Persistent link: https://www.econbiz.de/10005440080

GARCH Option Valuation: Theory and Evidence

Christoffersen, Peter; Jacobs, Kris; Ornthanalai, Chayawat - School of Economics and Management, University of Aarhus - 2012

We survey the theory and empirical evidence on GARCH option valuation models. Our treatment includes the range of … between GARCH and stochastic volatility models. In the appendix we provide Matlab computer code for option pricing via Monte …

Persistent link: https://www.econbiz.de/10010851269

Analyzing Oil Futures with a Dynamic Nelson-Siegel Model

Hansen, Niels S.; Lunde, Asger - School of Economics and Management, University of Aarhus - 2013

In this paper we are interested in the term structure of futures contracts on oil. The objective is to specify a relatively parsimonious model which explains data well and performs well in a real time out of sample forecasting. The dynamic Nelson-Siegel model is normally used to analyze and...

Persistent link: https://www.econbiz.de/10010851281

Asymptotic Theory for the QMLE in GARCH-X Models with Stationary and Non-Stationary Covariates

Han, Heejoon; Kristensen, Dennis - School of Economics and Management, University of Aarhus - 2012

GARCH model augmented by including an additional explanatory variable - the so-called GARCH-X model. The additional … to the results of Jensen and Rahbek (2004, Econometric Theory 20) who develop similar results for the pure GARCH model …

Persistent link: https://www.econbiz.de/10010851299

Long Memory in Stock Market Volatility and the Volatility-in-Mean Effect: The FIEGARCH-M Model

Christensen, Bent Jesper; Nielsen, Morten Ørregaard; … - School of Economics and Management, University of Aarhus - 2007

We extend the fractionally integrated exponential GARCH (FIEGARCH) model for daily stock return data with long memory …-in-mean effect is significant, and the FIEGARCH-M model outperforms the original FIEGARCH model and alternative GARCH …

Persistent link: https://www.econbiz.de/10005034729

Option Valuation with Conditional Heteroskedasticity and Non-Normality

Christoffersen, Peter; Elkamhi, Redouane; Feunou, Bruno; … - School of Economics and Management, University of Aarhus - 2009

We provide results for the valuation of European style contingent claims for a large class of specifications of the underlying asset returns. Our valuation results obtain in a discrete time, infinite state-space setup using the no-arbitrage principle and an equivalent martingale measure. Our...

Persistent link: https://www.econbiz.de/10005037432