Modeling the portfolio credit risk is one of the crucial issues of the last yearsin the financial problems. We propose the valuation model of Collateralized DebtObligations based on a one- and two-parameter copula and default intensities estimatedfrom market data. The presented method is used to...

Equity basket correlation is an important risk factor. It characterizes the strength of linear dependence between assets and thus measures the degree of portfolio diversification. It can be estimated both under the physical measure from return series, and under the risk neutral measure from...

We introduce the notion of realized copula. Based on assumptions of the marginal distributions of daily stock returns and a copula family, realized copula is defined as the copula structure materialized in realized covariance estimated from within-day high-frequency data. Copula parameters are...

The prices of wine is a key topic for market participants interested in valuing their stock, including dealers, restaurants or consumers who may be interested in optimizing their purchases. As a closely related issue, re-valuation is the need to regularly update the value of a stock. This need...

Stock picking is the field of financial analysis that is of particular interest for many professional investors and researchers. In this study stock picking is implemented via binary classification trees. Optimal tree size is believed to be the crucial factor in forecasting performance of the...

This chapter deals with nonparametric estimation of the risk neutral density. We present three different approaches which do not require parametric functional assumptions on the underlying asset price dynamics nor on the distributional form of the risk neutral density. The first estimator is a...

A primary goal in modelling the implied volatility surface (IVS) for pricing and hedging aims at reducing complexity. For this purpose one fits the IVS each day and applies a principal component analysis using a functional norm. This approach, however, neglects the degenerated string structure...

We propose a general class of Markov-switching-ARFIMA processes in order to combine strands of long memory and Markov-switching literature. Although the coverage of this class of models is broad, we show that these models can be easily estimated with the DLV algorithm proposed. This algorithm...

High-dimensional regression problems which reveal dynamic behavior are typically analyzed by time propagation of a few number of factors. The inference on the whole system is then based on the low-dimensional time series analysis. Such highdimensional problems occur frequently in many different...

The volatility implied by observed market prices as a function of the strike and time to maturity form an Implied Volatility Surface (IVS). Practical applications require reducing the dimension and characterize its dynamics through a small number of factors. Such dimension reduction is...