We study the optimal choice of quasi-likelihoods for nearly integrated,possibly non-normal, autoregressive models. It turns out that the two mostnatural candidate criteria, minimum Mean Squared Error (MSE) and maximumpower against the unit root null, give rise to different...

The asymmetric moving average model (asMA) is extended to allow forasymmetric quadratic conditional heteroskedasticity (asQGARCH). Theasymmetric parametrization of the conditional variance encompassesthe quadratic GARCH model of Sentana (1995). We introduce a framework fortesting asymmetries in...

Tests for structural stability with unknown breakpoint are derived for and applied tothe efficient method of moments. Three types of tests are discerned: Wald type tests,Predictive tests and Hansen type tests. The Hansen type test for structural stabilitywith unknown breakpoint is a novelty for...

Exchange rates typically exhibit time-varying patterns in both means andvariances. The histograms of such series indicate heavy tails. In thispaper we construct models which enable a decision-maker to analyze theimplications of such time series patterns for currency risk management.Our approach...

In this paper we compare the predictive abilility of Stochastic Volatility (SV)models to that of volatility forecasts implied by option prices. We develop anSV model with implied volatility as an exogeneous var able in the varianceequation which facilitates the use of statistical tests for...

We prove that the probability distribution of Hill's estimator can be betterapproximated by a series of appropriate gamma distributions than by the limitingnormal distribution.

Large data sets in finance with millions of observations have becomewidely available. Such data sets enable the construction of reliablesemi-parametric estimates of the risk associated with extreme pricemovements. Our approach is based on semi-parametric statisticalextreme value analysis, and...

Estimation using simulation techniques may be very time consuming. Specification tests for structuralstability often require more than one of such computationally demanding estimators. Typically one for thesample, one for the post-sample and one for the combination of sample and post-sample is...

We show that three convenient statistical properties that are known to hold forthe linear model with normal distributed errors that: (i.) when the variance is known, the likelihood based test statistics, Wald, Likelihood Ratio andScore or Lagrange Multiplier, coincide, (ii.) when the variance is...