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Modelling conditional correlations of asset returns: A smooth transition approach

Silvennoinen, Annastiina; Teräsvirta, Timo - School of Economics and Management, University of Aarhus - 2012

In this paper we propose a new multivariate GARCH model with time-varying conditional correlation structure. The time-varying conditional correlations change smoothly between two extreme states of constant correlations according to a predetermined or exogenous transition variable. An LM-test is...

Persistent link: https://www.econbiz.de/10009652369

Modelling Multivariate Autoregressive Conditional Heteroskedasticity with the Double Smooth Transition Conditional Correlation GARCH Model

Silvennoinen, Annastiina; Teräsvirta, Timo - School of Economics and Management, University of Aarhus - 2008

In this paper we propose a multivariate GARCH model with a time-varying conditional correlation structure. The new Double Smooth Transition Conditional Correlation GARCH model extends the Smooth Transition Conditional Correlation GARCH model of Silvennoinen and Ter¨asvirta (2005) by including...

Persistent link: https://www.econbiz.de/10005114133

Does Realized Skewness Predict the Cross-Section of Equity Returns?

Amaya, Diego; Christoffersen, Peter; Jacobs, Kris; … - School of Economics and Management, University of Aarhus - 2013

We use intraday data to compute weekly realized variance, skewness, and kurtosis for equity returns and study the … relationship between realized kurtosis and next week?'s stock returns is positive, but the evidence is not always robust and …

Persistent link: https://www.econbiz.de/10010851291

Do Realized Skewness and Kurtosis Predict the Cross-Section of Equity Returns?

Amaya, Diego; Christoffersen, Peter; Jacobs, Kris; … - School of Economics and Management, University of Aarhus - 2011

Yes. We use intraday data to compute weekly realized variance, skewness and kurtosis for individual equities and assess … kurtosis and next week?s stock returns. We do not ?nd a strong relationship between realized volatility and stock returns. A … with high realized kurtosis and sells stocks with low realized kurtosis produces a weekly return of 16 basis points with a …

Persistent link: https://www.econbiz.de/10009385751

Forecasting with Option Implied Information

Christoffersen, Peter; Jacobs, Kris; Chang, Bo Young - School of Economics and Management, University of Aarhus - 2011

volatility, skewness, kurtosis, and density forecasting. More generally, we discuss how any forecasting object which is a twice …

Persistent link: https://www.econbiz.de/10009385753

Models for S&P500 Dynamics: Evidence from Realized Volatility, Daily Returns, and Option Prices

Christoffersen, Peter; Jacobs, Kris; Mimouni, Karim - School of Economics and Management, University of Aarhus - 2007

Most recent empirical option valuation studies build on the affine square root (SQR) stochastic volatility model. The SQR model is a convenient choice, because it yields closed-form solutions for option prices. However, relatively little is known about the resulting biases. We investigate...

Persistent link: https://www.econbiz.de/10005787563

Simulation of multivariate diffusion bridges

Bladt, Mogens; Finch, Samuel; Sørensen, Michael - School of Economics and Management, University of Aarhus - 2014

bridges are used as proposal for easily implementable MCMC algorithms that produce exact diffusion bridges. The new method is …

Persistent link: https://www.econbiz.de/10010851217

Bayesian Option Pricing Using Mixed Normal Heteroskedasticity Models

Rombouts, Jeroen V.K.; Stentoft, Lars - School of Economics and Management, University of Aarhus - 2009

While stochastic volatility models improve on the option pricing error when compared to the Black-Scholes-Merton model, mispricings remain. This paper uses mixed normal heteroskedasticity models to price options. Our model allows for significant negative skewness and time varying higher order...

Persistent link: https://www.econbiz.de/10005440079

Simple simulation of diffusion bridges with application to likelihood inference for diffusions

Bladt, Mogens; Sørensen, Michael - School of Economics and Management, University of Aarhus - 2010

With a view to likelihood inference for discretely observed diffusion type models, we propose a simple method of simulating approximations to diffusion bridges. The method is applicable to all one-dimensional diffusion processes and has the advantage that simple simulation methods like the Euler...

Persistent link: https://www.econbiz.de/10008462029

Marginal Likelihood for Markov-switching and Change-point Garch Models

Luc, Luc; Dufays, Arnaud; Rombouts, Jeroen V.K. - School of Economics and Management, University of Aarhus - 2011

process. Flexible alternatives are Markov-switching GARCH and change-point GARCH models. They require estimation by MCMC … essential for determining the number of regimes or change-points. We solve the problem by using particle MCMC, a technique …

Persistent link: https://www.econbiz.de/10009371456