Markovian Projection is an optimal approximation of a complex underlying process with a simpler one, keeping essential properties of the initial process. The Heston process, as the Markovian Projection target, is an example.In this article, we generalize the results of Markovian Projection onto...

Several studies have put forward that hedge fund returns exhibit a nonlinear relationship with equity market returns, captured either through constructed portfolios of traded options or piece-wise linear regressions. This paper provides a statistical methodology to unveil such non-linear...

We develop and apply a set of hypothesis tests with which to study changes in the angular distribution of points in delay space. Crack and Ledoit (1996) plotted daily stock returns against themselves with one day's lag. (This might be described as a plot in delay space). The graph shows these...

The purpose of the paper is to propose a global discrete-time modeling of the term structure of interest rates able to capture simultaneously the following important features: (i) an historical dynamics of the factor driving term structure shapes involving several lagged values, and switching...

The purpose of this paper is to propose discrete-time term structure models where the historical dynamics of the factor (x_t) is given, in the univariate case, by a Gaussian AR(p) process, and, in the multivariate case, by a Gaussian n-dimensional VAR(p) process. The factor (x_t) is considered...

We develop a systematic approach to the reduction of dimensionality of smile-enabled models by projecting them onto a displaced version of the two-dimensional Heston process. The projection is the key for deriving efficient, analytical approximations to European option prices in such models....

This paper addresses the following questions: Are the major European stock markets more integrated after the introduction of the Euro? How much of the change in the stock indices in different European countries can be attributed to innovations in other markets? How fast are events occurring in...

This paper analyzes simultaneous exceedances (coexceedances) of several stock index returns for different thresholds with a focus on the Asian crisis in 1997. We introduce a new concept of computing and estimating time-varying coexceedances and usethe quantile regression model to analyze...