Market option prices in last 20 years confirmed deviations from the Black and Scholes (BS) models assumptions, especially on the BS implied volatility. Implied binomialtrees (IBT) models capture the variations of the implied volatility known as \volatility smile". They provide a discrete...

Comparing groups with respect to hypothetical constructs requires that the measurement models are equal across groups. Otherwise conclusions drawn from the observed indicators regarding differences at the latent level (mean differences, differences in the structural relations) might be severly...

Exploratory factor analysis (EFA) is an important tool in data analyses,particularly in social science. Usually four steps are carried out which contain alarge number of options. One important option is the number of factors and theassociation of variables with a factor. Our tools aim 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...

In the ideal Black-Scholes world, financial time series are assumed 1) stationary (time homogeneous) and 2) having conditionally normal distribution given the past. These two assumptions have been widely-used in many methods such as the RiskMetrics, one risk management method considered as...

A new algorithm for finding value functions of finite horizon optimal stopping problems in one-dimensional diffusion models is presented. It is based on a time discretization of the corresponding integral equation. The proposed iterative procedure for solving the discretized integral equation...

In this study we forecast the term structure of FIBOR/EURIBOR swap rates by means of recursive vector autoregressive (VAR) models. In advance, a principal components analysis (PCA) is adopted to reduce the dimensionality of the term structure. To evaluate ex–ante forecasting performance for...

State price densities (SPD) are an important element in applied quantitativefinance. In a Black-Scholes model they are lognormal distributions with constant volatility parameter. In practice volatility changes and the distribution deviates from log-normality. We estimate SPDs using EUREX option...

The Black-Scholes formula, one of the major breakthroughs of modern finance,allows for an easy and fast computation of option prices. But some of its assumptions, like constant volatility or log-normal distribution of asset prices,do not find justification in the markets. More complex models,...