This first chapter serves as an introduction and overview for a collection of articles surveying the current state of the science of computational statistics. Earlier versions of most of these articles appeared in the first edition of Handbook of Computational Statistics: Concepts and Methods,...

The Heston model stands out from the class of stochastic volatility (SV) models mainly for two reasons. Firstly, the process for the volatility is nonnegative and mean-reverting, which is what we observe in the markets. Secondly, there exists a fast and easily implemented semi-analytical...

Basel II Pillar 3 reports provide information about banks' exposure towards a number of risk factors, such as corporate credit risk and interest rate risk. Previous studies nd that the quality of such information is likely to be weak. We analyze the marginal contribution of pillar 3 exposure...

We analyze the theoretical moments of a nonlinear approximation to a model of business cycles and asset pricing with stochastic volatility and recursive preferences. We find that heteroskedastic volatility operationalizes a time-varying risk adjustment channel that induces variability in...

This work develops change-point methods for statistics of high-frequency data. The main interest is the volatility of an Itˆo semi-martingale, which is discretely observed over a fixed time horizon. We construct a minimax-optimal test to discriminate different smoothness classes of the...

As an asset is traded, its varying prices trace out an interesting time series. The price, at least in a general way, reflects some underlying value of the asset. For most basic assets, realistic models of value must involve many variables relating not only to the individual asset, but also to...

In this paper, we develop and apply Bayesian inference for an extended Nelson- Siegel (1987) term structure model capturing interest rate risk. The so-called Stochastic Volatility Nelson-Siegel (SVNS) model allows for stochastic volatility in the underlying yield factors. We propose a Markov...

Information flows across international financial markets typically occur within hours, making volatility spillover appear contemporaneous in daily data. Such simultaneous transmission of variances is featured by the stochastic volatility model developed in this paper, in contrast to usually...

We give an explicit PDE characterization for the solution of a robust utility maximization problem in an incomplete market model, whose volatility, interest rate process, and long-term trend are driven by an external stochastic factor process. The robust utility functional is defined in terms of...

In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration procedure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to...