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In this dissertation we focus on two points in the study of financial statistics, volatility estimation and option …
The arbitrage-free term structure model of Heath, Jarrow and Morton is one of the standard tools for the theoretical analysis of fixed income securities and their associated derivatives. A specific HJM model is fully determined by a choice of volatility structure. This is attributed to the...
A traditional model for financial asset prices is that of a solution of a stochastic differential equation, driven by Brownian motion and Lebesgue measure; that is, a standard diffusion. The classic Black-Scholes model is a special case of this rubric. In some situations, however, such a model is...
utilized test statistics. When the number of tests is large, the explicit modeling of dependence structure becomes difficult …. This paper catches up with the recent developments in Statistics by applying a state-of-the-art "empirical null hypothesis …
The importance of skewness and kurtosis in the return generating process is assessed by examining the out-of-sample forecasting power of three different Exponential GARCH models that assume the conditional errors are generated by a normal distribution, a generalized error distribution, and a...
The Arbitrage Pricing Theory (APT) was proposed by Ross (1976) as an alternative to the Capital Asset Pricing Model (CAPM) for computing the theoretical price of freely traded securities. The APT is based on the premise of linear return generating factors, rather than on the frequently...
Most discrete time literature uses the beta that results from a regression of an asset's simple returns on various factors to quantify risk. The departing point for this thesis is the consistent use of log-returns. When log-returns are considered, the relevant measure of systematic risk becomes...
With the emergence and expansion of credit derivatives, which are financial instruments that are based on corporate bonds and provide their holders a protection against default, the importance of estimating probabilities of default has reached an unprecedented level. We have developed a Bayesian...
The term structure of interest rates is used to price defaultable bonds and credit derivatives, as well as to infer the quality of bonds for risk management purposes. We introduce a new framework for estimating the term structure of interest rates for corporate bonds. The proposed model jointly...
Assessing the economic value of increasingly precise covariance estimates is of great interest in finance. We present a …