We develop a novel large-scale Network Autoregressive model with balance Constraint (NAC) to predict hour-ahead gas flows in the gas transmission network, where the total in- and out-flows of the network are balanced over time. By integrating recent advances in optimization and statistical...

This paper analyzes empirical market utility functions and pricing kernels derived from the DAX and DAX option data for three market regimes. A consistent parametric framework of stochastic volatility is used. All empirical market utility functions show a region of risk proclivity that is...

We consider two semiparametric models for the weight function in a bias sample model. The object of our interest parametrizes the weight function, and it is either Euclidean or non Euclidean. One of the models discussed in this paper is motivated by the estimation the mixing distribution of...

This paper proposes a rating methodology that is based on a non-linear classification method, the support vector machine, and a non-parametric technique for mapping rating scores into probabilities of default. We give an introduction to underlying statistical models and represent the results of...

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 propose a new nonlinear classification method based on a Bayesian "sum-of-trees" model, the Bayesian Additive Classification Tree (BACT), which extends the Bayesian Additive Regression Tree (BART) method into the classification context. Like BART, the BACT is a Bayesian nonparametric additive...

Empirical studies have shown that a large number of financial asset returns exhibit fat tails and are often characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in market volatility, with significant impact on pricing and...

A great proportion of stock dynamics can be explained using publicly available information. The relationship between dynamics and public information may be of nonlinear character. In this paper we offer an approach to stock picking by employing so-called decision trees and applying them to XETRA...