We show that persistence of conditional volatility in large samples could be exaggerated by the existence of structural breaks in the ARCH and GARCH parameters. Our results suggest that extreme persistence frequently observed in index volatility does not necessarily indicate the same level of...

This article derives a closed form formula for the arbitrage free price of the options on the One day Brazilian Interfinancial Deposits Index (IDI) using some results from modern theory of finance.The importance of this work is twofold: one theoretical and another practical. From a theoretical...

We test forecast rationality for Brazilian inflation using Survey of Professional Forecasters (SPF) for each month. We consider panel data traditional tests as Mincer and Zarnowitz (1969) and West and McCracken (1998) to verify if forecast errors have zero mean and are uncorrelated with the...

This paper investigates whether or not multivariate co-integrated process with structural change can describe the Brazilian term structure of interest rate data from 1995 to 2006. In this work the break point and the number of co-integrated vector are assumed to be known. The estimated model has...

Usually, inflation is optimally forecasted using simple time series models or a Phillips' curve process. However, as more people become online shoppers, ``online inflation'' turns out to be a good predictor of official inflation too. Online prices can be obtained at a higher frequency than...