Financial risk control has always been challenging and becomes now an even harder problem as joint extreme events occur more frequently. For decision makers and government regulators, it is therefore important to obtain accurate information on the interdependency of risk factors. Given a...

We introduce the notion of realized copula. Based on assumptions of the marginal distri- butions of daily stock returns and a copula family, realized copula is dened as the copula structure materialized in realized covariance estimated from within-day high-frequency data. Copula parameters are...

In this paper, we review the most common specifications of discrete-time stochas- tic volatility (SV) models and illustrate the major principles of corresponding Markov Chain Monte Carlo (MCMC) based statistical inference. We provide a hands-on ap- proach which is easily implemented in empirical...

Risk management and the thorough understanding of the relations between financial markets and the standard theory of macroeconomics have always been among the topics most addressed by researchers, both financial mathematicians and economists. This work aims at explaining investors’ behavior...

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...

A new test for constant correlation is proposed. Based on the bivariate Student-t distribution, this test is derived as Lagrange multiplier (LM) test. Whereas most of the traditional tests (e.g. Jennrich, 1970, Tang, 1995 and Goetzmann, Li & Rouwenhorst, 2005) specify the unknown correlations as...

A State Price Density (SPD) is the density function of a risk neutral equivalent martingale measure for option pricing, and is indispensible for exotic option pricing and portfolio risk management. Many approaches have been proposed in the last two decades to calibrate a SPD using financial...

A good description of the dynamics of interest rates is crucial to price derivatives and to hedge corresponding risk. Interest rate modelling in an unstable macroeconomic context motivates one factor models with time varying parameters. In this paper, the local parameter approach is introduced...

The distribution of treatment eects extends the prevailing focus on average treatment eects to the tails of the outcome variable and quantile treatment eects denote the predominant technique to compute those eects in the presence of a confounding mechanism. The underlying quantile regression is...

We propose the realized systemic risk beta as a measure for financial companies’ contribution to systemic risk given network interdependence between firms’ tail risk exposures. Conditional on statistically pre-identified network spillover effects and market and balance sheet information, we...