Encompassing a very broad family of ARCH-GARCH models we show that heteroskedasticity, already well documented for the US market, is a worldwide phenomenon. The AT-GARCH (1,1) model, where volatility rises more in response to bad news than to good news, and where news is considered bad only...

This article proposes an estimation procedure for the affine stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint (here bi-variate) unconditional characteristic function for the stochastic process for which we...

We evaluate how departure from normality may affect the allocation of assets. A Taylor series expansion of the expected utility allows to focus on certain moments and to compute numerically the optimal portfolio allocation. A decisive advantage of this approach is that it remains operational...

We evaluate how departure from normality may affect the conditional allocation of wealth. The expected utility function is approximated by a fourth-order Taylor expansion that allows for non-normal returns. Market returns are characterized by a joint model that captures the time dependency and...

We evaluate how deviations from normality may affect the allocation of assets. A Taylor expansion of expected utility allows us to focus on certain moments and to compute numerically the optimal portfolio allocation. A decisive advantage of our approach is that it remains operational even if a...

We develop a new methodology to measure conditional dependency between time series each driven by complicated marginal distributions. We achieve this by using copula functions that link marginal distributions, and by expressing the parameter of the copula as a function of predetermined...

Designing an investment strategy in transition economies is a difficult task because stock-markets opened through time, time series are short, and there is little guidance how to obtain expected returns and covariance matrices necessary for mean-variance portfolio allocation. Also, structural...

In this paper, we use a database consisting of daily stock-index returns for 20 countries to test for similarities between the left and right tail of returns as well as for cross-sectional differences. To mitigate the issue of dependency between stock returns, we estimate the distribution of...

We develop a new methodology that measures conditional dependency. We achieve this by using copula functions that link marginal distributions, here chosen to obey a GARCH-type model with time-varying skewness and kurtosis. We apply this model to daily returns of stock-market indices. We find...

Recent portfolio choice, asset pricing, and option valuation models highlight the importance of skewness and kurtosis. Since skewness and kurtosis are related to extreme variations, they are also important for Value-at-Risk measurements. Our framework builds on a GARCH model with a conditional...