In January 2005 the EU-wide CO2 emissions trading system (EU-ETS) has formally entered into operation. Within the new trading system, the right to emit a particular amount of CO2 becomes a tradable commodity - called EU Allowances (EUAs) - and affected companies, traders and investors will face...

The calibration of option pricing models leads to the minimization of an error functional. We show that its usual specification as a root mean squared error implies fluctuating exotics prices and possibly wrong prices. We propose a simple and natural method to overcome these problems, illustrate...

The Value-at-Risk calculation reduces the dimensionality of the risk factor space. The main reasons for such simplifications are, e.g., technical efficiency, the logic and statistical appropriateness of the model. In Chapter 2 we present three simple mappings: the mapping on the market index,...

By extending the GARCH option pricing model of Duan (1995) to more flexible volatility estimation it is shown that the prices of out-of-the-money options strongly depend on volatility features such as asymmetry. Results are provided for the properties of the stationary pricing distribution in...

Standard goodness-of-fit tests for a parametric regression model against a series of nonparametric alternatives are based on residuals arising from a fitted model. When a parametric regression model is compared with a nonparametric model, goodness-of-fit testing can be naturally approached by...

This paper deals with a quite general nonparametric statistical curve estimation setting. Special cases include estimation or probability density functions, regression functions, and hazard functions. The class of "fractional delta sequence estimators" is defined and treated here. This class...

SFB 649 Discussion Paper 2008-003 S FB 6 4 9 E C O N O M I C R I S K B E R L I N The Bayesian Additive Classification Tree Applied to Credit Risk Modelling Junni L. Zhang*...