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Option Pricing using Realized Volatility
Stentoft, Lars - School of Economics and Management, University of Aarhus - 2008
In the present paper we suggest to model Realized Volatility, an estimate of daily volatility based on high frequency data, as an Inverse Gaussian distributed variable with time varying mean, and we examine the joint properties of Realized Volatility and asset returns. We derive the appropriate...
Persistent link: https://www.econbiz.de/10005440036
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Forecasting Macroeconomic Variables using Neural Network Models and Three Automated Model Selection Techniques
Kock, Anders Bredahl; Teräsvirta, Timo - School of Economics and Management, University of Aarhus - 2011
In this paper we consider the forecasting performance of a well-defined class of flexible models, the so-called single hidden-layer feedforward neural network models. A major aim of our study is to find out whether they, due to their flexibility, are as useful tools in economic forecasting as...
Persistent link: https://www.econbiz.de/10009277000
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Indirect inference with time series observed with error
Rossi, Eduardo; Magistris, Paolo Santucci de - School of Economics and Management, University of Aarhus - 2014
We analyze the properties of the indirect inference estimator when the observed series are contaminated by measurement error. We show that the indirect inference estimates are asymptotically biased when the nuisance parameters of the measurement error distribution are neglected in the indirect...
Persistent link: https://www.econbiz.de/10011106767
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On IGARCH and convergence of the QMLE for misspecified GARCH models
Jensen, Anders Tolver; Lange, Theis - School of Economics and Management, University of Aarhus - 2009
We address the IGARCH puzzle by which we understand the fact that a GARCH(1,1) model fitted by quasi maximum likelihood … data is generated by certain types of continuous time stochastic volatility models, but fitted to a GARCH(1,1) model one …
Persistent link: https://www.econbiz.de/10005198859
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American Option Pricing with Discrete and Continuous Time Models: An Empirical Comparison
Stentoft, Lars - School of Economics and Management, University of Aarhus - 2011
This paper considers discrete time GARCH and continuous time SV models and uses these for American option pricing. We … two models, though the discrete time GARCH prices converge quickly to the continuous time SV values. Finally, a large … generally perform better than the discrete time GARCH specifications. …
Persistent link: https://www.econbiz.de/10009320846
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The cyclical component factor model
Dahl, Christian M.; Hansen, Henrik; Smidt, John - School of Economics and Management, University of Aarhus - 2008
Forecasting using factor models based on large data sets have received ample attention due to the models’ ability to increase forecast accuracy with respect to a range of key macroeconomic variables in the US and the UK. However, forecasts based on such factor models do not uniformly...
Persistent link: https://www.econbiz.de/10005440058
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Combining Long Memory and Level Shifts in Modeling and Forecasting the Volatility of Asset Returns
Varneskov, Rasmus Tangsgaard; Perron, Pierre - School of Economics and Management, University of Aarhus - 2011
We propose a parametric state space model with accompanying estimation and forecasting framework that combines long memory and level shifts by decomposing the underlying process into a simple mixture model and ARFIMA dynamics. The Kalman filter is used to construct the likelihood function after...
Persistent link: https://www.econbiz.de/10009150791
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How Non-Gaussian Shocks Affect Risk Premia in Non-Linear DSGE Models
Andreasen, Martin M. - School of Economics and Management, University of Aarhus - 2010
disasters, stochastic volatility, and GARCH affect any risk premia in a wide class of DSGE models. To quantify these effects, we … volatility, and GARCH. We ?find that rare disasters increase the mean level of the 10-year nominal term premium, whereas a key … effect of stochastic volatility and GARCH is an increase in the variability of this premium. …
Persistent link: https://www.econbiz.de/10008677228
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Option valuation with the simplified component GARCH model
Dziubinski, Matt P. - School of Economics and Management, University of Aarhus - 2011
We introduce the Simplified Component GARCH (SC-GARCH) option pricing model, show and discuss sufficient conditions for …
Persistent link: https://www.econbiz.de/10008854105
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The Model Confidence Set
Hansen, Peter R.; Lunde, Asger; Nason, James M. - School of Economics and Management, University of Aarhus - 2010
The paper introduces the model confidence set (MCS) and applies it to the selection of models. A MCS is a set of models that is constructed such that it will contain the best model with a given level of confidence. The MCS is in this sense analogous to a confidence interval for a parameter. The...
Persistent link: https://www.econbiz.de/10008784441