The aim of this paper is to model the dependencya mong log-returns when security account prices are expressed in units of a well diversified world stock index. The paper uses the equi-weighted index EWI104s, calculated as the average of 104 world industry sector indices. The log-returns of its...

The aim of this paper is to document some empirical facts related to log-returns of diversified world stock indices when these are denominated in different currencies. Motivated by earlier results, we have obtained the estimated distribution of log-returns for a range of world stock indices over...

Accurate scenario simulation methods for solutions of multi-dimensional stochastic differential equations find application in stochastic analysis, the statistics of stochastic processes and many other areas, for instance, in finance. They have been playing a crucial role as standard models in...

This paper studies the application of exact simulation methods for multi-dimensional multiplicative noise stochastic differential equations to filtering. Stochastic differential equations with multiplicative noise naturally occur as Zakai equation in hidden Markov chain filtering. The paper...

Estimation theory has shown, due to the limited estimation window available for real asset data, the sample based Markowitz mean-variance approach produces unreliable weights which fluctuate substantially over time. This paper proposes an alternate approach to portfolio optimization, being the...

In this paper we analyze the simulated behavior of diversified portfolios in a continuous financial market. In particular, we focus on equally weighted portfolios. We illustrate that these well diversified portfolios constitute good proxies of the growth optimal portfolio. The multi-asset market...

The paper analyzes the simulated long-term behavior of well diversified portfolios in continuous financial markets. It focuses on the equi-weighted index and the market portfolio. The paper illustrates that the equally weighted portfolio constitutes a good proxy of the growth optimal portfolio,...

The paper derives a parsimonious two-component affine diffusion model for a world stock index to capture the dynamics of aggregate wealth. The observable state variables of the model are the normalized index and the inverse of the stochastic market activity, both modeled as square root...

The paper derives a parsimonious two-component affine diffusion model with one driving Brownian motion to capture the dynamics of oil prices. It can be observed that the oil price behaves in some sense similarly to the US dollar. However, there are also clear differences. To identify these the...

This paper deals with the estimation of continuous-time diffusion processes which model the dynamics of a well diversified world stock index (WSI). We use the nonparametric kernel-based estimation to empirically identify a square root type diffusion coefficient function in the dynamics of the...