Daily returns of financial assets are frequently found to exhibit positive autocorrelation at lag 1. When specifying a linear AR(l) conditional mean, one may ask how this predictability affects option prices. We investigate the dependence of option prices on autoregressive dynamics under...

Time-varying risk premia traditionally have been associated with the empirical fact that conditional second moments are time-varying. This paper additionally examines another possible source for time-varying risk premia, namely the market price of risk (lambda). For utility functions that do not...

One puzzling behavior of asset returns for various frequencies is the often observed positive autocorrelation at lag 1. To some extent this can be explained by standard asset pricing models when assuming time varying risk premia. However, one often finds better results when directly fitting an...

In this paper we introduce a bootstrap procedure to test parameter restrictions in vector autoregressive models which is robust in cases of conditionally heteroskedastic error terms. The adopted wild bootstrap method does not require any parametric specification of the volatility process and...

Tests of causality in variance in multiple time series have been proposed recently, based on residuals of estimated univariate models. Although such tests are applied frequently little is known about their power properties. In this paper we show that a convenient alternative to residual based...

Predicting default probabilities is at the core of credit risk management and is becoming more and more important for banks in order to measure their client's degree of risk, and for firms to operate successfully. The SVM with evolutionary feature selection is applied to the CreditReform...

Stochastic frontier models are widely used to measure, e.g., technical efficiencies of firms. The classical stochastic frontier model often suffers from the empirical artefact that the residuals of the production function may have a positive skewness, whereas a negative one is expected under the...

In presence of panel data, technical efficiency is used to compare the performances of Decision-Making Units (DMUs). The novelty of this paper is the consideration of the dependence between the two error terms in the case of panel data and the introduction of time effect models in the Stochastic...

Stochastic Volatility (SV) models are widely used in financial applications. To decide whether standard parametric restrictions are justified for a given dataset, a statistical test is required. In this paper, we develop such a test based on the linear state space representation. We provide a...

This paper derives conditions for the existence of fourth moments of multivariate GARCH processes in the general vector specification and gives explicit results for the fourth moments and autocovariances of the squares and cross-products. Results are provided for the kurtosis and co-kurtosis...