Modeling the portfolio credit risk is one of the crucial issues of the last yearsin the financial problems. We propose the valuation model of Collateralized DebtObligations based on a one- and two-parameter copula and default intensities estimatedfrom market data. The presented method is used to...

Independent component analysis (ICA) is a modern factor analysis tool developed in the last two decades. Given p-dimensional data, we search for that linear combination of data which creates (almost) independent components. Here copulae are used to model the p-dimensional data and then...

Normal distribution of the residuals is the traditional assumption in the classicalmultivariate time series models. Nevertheless it is not very often consistent with the real data.Copulae allows for an extension of the classical time series models to nonelliptically distributedresiduals. In this...

With the recent availability of high-frequency nancial data the longrange dependence of volatility regained researchers' interest and has leadto the consideration of long memory models for realized volatility. Thelong range diagnosis of volatility, however, is usually stated for long...

In this paper we provide a review of copula theory with applications to finance. We illustrate the idea on the bivariate framework and discuss the simple, elliptical and Archimedean classes of copulae. Since the copulae model the dependency structure between random variables, next we explain the...

Dimension reduction techniques for functional data analysis model and approximate smooth random functions by lower dimensional objects. In many applications the focus of interest lies not only in dimension reduction but also in the dynamic behaviour of the lower dimensional objects. The most...

Stock picking is the field of financial analysis that is of particular interest for many professional investors and researchers. In this study stock picking is implemented via binary classification trees. Optimal tree size is believed to be the crucial factor in forecasting performance of the...

A great proportion of stock dynamics can be explained using publicly availableinformation. The relationship between dynamics and public information may be ofnonlinear character. In this paper we offer an approach to stock picking by employing so-called decision trees and applying them to XETRA...

Empirical studies have shown that a large number of financial asset returns exhibit fat tails and are often characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in market volatility, with significant impact on pricing and...

The volatility implied by observed market prices as a function of the strikeand time to maturity form an Implied Volatility Surface (IV S). Practicalapplications require reducing the dimension and characterize its dynamicsthrough a small number of factors. Such dimension reduction is...