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...

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...

We present a series of models capturing the non-stationarities and dependencies in the variance of yields on natural gas futures. Both univariate and multivariate models are explored, based on the ARIMA and Hidden-Markov methodologies. The models capture the effects uncovered through various...