GARCH models are widely used in financial econometrics. However, we show by mean of a simple simulation example that the GARCH approach may lead to a serious model misspecification if the assumption of stationarity is violated. In particular, the well known integrated GARCH effect can be...

Measuring and modeling financial volatility is the key to derivative pricing, asset allocation and risk management. The recent availability of high-frequency data allows for refined methods in this field. In particular, more precise measures for the daily or lower frequency volatility can be...

This paper offers a new method for estimation and forecasting of the linear and nonlinear time series when the stationarity assumption is violated. Our general local parametric approach particularly applies to general varying-coefficient parametric models, such as AR or GARCH, whose coefficients...

We propose a general class of Markov-switching-ARFIMA processes in order to combine strands of long memory and Markov-switching literature. Although the coverage of this class of models is broad, we show that these models can be easily estimated with the DLV algorithm proposed. This algorithm...

This paper applies a non- and a semiparametric copula-based approach to analyze the first-order autocorrelation of returns in high frequency financial time series. Using the EUREX D3047 tick data from the German stock index, it can be shown that the temporal dependence structure of price...

We consider the problem of estimating the fractional order of a L´evyprocess from low frequency historical and options data. An estimationmethodology is developed which allows us to treat both estimation andcalibration problems in a unified way. The corresponding procedureconsists of two steps:...

In this note we establish the existence of the first two moments of the asymptotic tracestatistic, which appears as weak limit of the likelihood ratio statistic for testing the cointe-gration rank in a vector autoregressive model and whose moments may be used to developpanel cointegration tests....

The purpose of this paper is to propose a new likelihood-based panel cointegration testin the presence of a linear time trend in the data generating process. This new test is an extensionof the likelihood ratio (LR) test of Saikkonen & L¨utkepohl (2000) for trend-adjusteddata to the panel data...

The behaviour of market agents has always been extensively covered in the literature. Risk averse behaviour, described by von Neumann and Morgenstern (1944) via a concave utility function, is considered to be a cornerstone of classical economics. Agents prefer a fixed profit over uncertain...

We introduce new stylometry tools based on the sliced conditional compression complexity of literary texts which are inspired by the nearly optimal application of the incomputable Kolmogorov conditional complexity (and presumably approximates it). Whereas other stylometry tools can occasionally...