Some recent specifications for GARCH error processes explicitly assume a conditional variance that is generated by a mixture of normal components, albeit with some parameter restrictions. This paper analyses the general normal mixture GARCH(1,1) model which can capture time-variation in both...

Current research on financial risk management applications of econometrics centres on the accurate assessment of individual market and credit risks with relatively little theoretical or applied econometric research on other types of risk, aggregation risk, data incompleteness and optimal risk...

We provide an accurate approximation method for inverting an option price to the implied volatility under arithmetic Brownian motion. The maximum error in the volatility is in the order of 1e-10 of the given option price and much smaller for the near-the-money options. Thus our approximation can...

We provide an accurate approximation method for inverting an option price to the implied volatility under arithmetic Brownian motion, which is widely quoted in Fixed Income markets. The maximum error in the volatility is in the order of 10-10 of the given option price and much smaller for the...

This paper presents an empirical comparison of the out of sample hedging performance from naïve and minimum variance hedge ratios for the four largest US index exchange traded funds (ETFs). Efficient hedging is important to offset long and short positions on market maker's accounts,...