The focus of the volatility literature on forecasting and the predominance of the conceptually simpler HAR model over long memory stochastic volatility models has led to the fact that the actual degree of memory estimates has rarely been considered. Estimates in the literature range roughly...

It is well known that intraday volatilities and trading volumes exhibit strong seasonal features. These seasonalities are usually modeled using dummy variables or deterministic functions. Here, we propose a test for seasonal long memory with a known frequency. Using this test, we show that...

This paper extends the popular Diebold-Mariano test to situations when the forecast error loss differential exhibits long memory. It is shown that this situation can arise frequently, since long memory can be transmitted from forecasts and the forecast objective to forecast error loss...

Realized volatility underestimates the variance of daily stock index returns by an average of 14 percent. This is documented for a wide range of international stock indices, using the fact that the average of realized volatility and that of squared returns should be the same over longer time...

In this paper we compare the price of an option with one year maturity of the German stock index DAX for several volatility models including long memory and leverage effects. We compute the price by applying a present value scheme as well as the Black-Scholes and Hull-White formulas which...

The accuracy of measuring credit risk directly decides on the interest on credit, which has to be paid when raising a credit, and the amount of capital to keep in reserve by a firm. The structural credit risk model proposed by Merton (1974) lays the groundwork for the assessment of a firm's...