This paper examines the link between exchange rate volatility and economic fundamentals. In the framework of a multivariate volatility model that allows volatility spillover, we develop a new impulse response analysis to estimate and decompose the simultaneous effect of macroeconomic news...

This paper provides simple approximations for evaluating option prices and implied volatilities under stochastic volatility. Simple recursive formulae are derived that can easily be implemented in spreadsheets. The traditional random walk assumption, dominating in the analysis of financial...

Chapter written for the Handbook of Volatility Models and their Applications, edited by Luc Bauwens, Christian Hafner, and Sébastien Laurent, forthcoming in 2012 (John Wiley & sons). This chapter presents an introductory review of volatility models and some applications. The review is linked...

Discovering the preferences and the behaviour of consumers is a key challenge in marketing. Information about such topics can be gathered through surveys in which the respondents must assign a score to a number of items. A strategy based on different latent class models can be used to analyze...

This paper considers the impact of ordinary least squares (OLS) detrending and the first difference (FD) detrending on autocorrelation estimation in the presence of long memory and deterministic trends. We show that the FD detrending results in inconsistent autocorrelation estimates when the...

In the empirical analysis of financial time series, multivariate GARCH models have been used in various forms. As it is typical for nonlinear models there is yet no unique framework available to uncover dynamic covariance relationships for vector return processes. We introduce a new concept of...

This paper investigates the performance of quasi maximum likelihood (QML) and nonlinear least squares (NLS) estimation applied to temporally aggregated GARCH models. Since these are known to be only weak GARCH, the conditional variance of the aggregated process is in general not known. Thus, one...

In this article, we put forward a generalization of the Dynamic Conditional Correlation (DCC) Model of Engle (2002). Our model allows for asset-specific correlation sensitivities, which is useful in particular if one aims to summarize a large number of asset returns. We propose two estimation...

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...