Most dimension reduction methods based on nonparametric smoothing are highlysensitive to outliers and to data coming from heavy-tailed distributions. We showthat the recently proposed methods by Xia et al. (2002) can be made robust insuch a way that preserves all advantages of the original...

The catching up process in Czech Republic, Hungary, and Poland is analyzed by investigating the integration properties of log-differences in per-capita GDP versus the EU15 and a Mediterranean country group. We account for structural changes by using unit root tests that allow for two endogenous...

How can we measure and compare the relative performance of production units?If input and output variables are one dimensional, then the simplest way is tocompute efficiency by calculating and comparing the ratio of output and inputfor each production unit. This idea is inappropriate though, when...

Trading, hedging and risk analysis of complex option portfolios depend on accurate pricing models. The modelling of implied volatilities (IV) plays an important role, since volatility is the crucial parameter in the Black-Scholes (BS) pricing formula. It is well known from empirical studies that...

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,...

An enormous number of statistical methods have been developed in quantitivefinance during the last decades. Nonparametric methods, bootstrapping timeseries, wavelets, estimation of diffusion coefficients are now almost standard instatistical applications. To implement these new methods the...

The purpose of this work is to introduce one of the most promising among recentlydeveloped statistical techniques – the support vector machine (SVM) –to corporate bankruptcy analysis. An SVM is implemented for analysing suchpredictors as financial ratios. A method of adapting it to default...

Many of the concepts in theoretical and empirical finance developed over thepast decades - including the classical portfolio theory, the Black-Scholes-Mertonoption pricing model and the RiskMetrics variance-covariance approach toValue at Risk (VaR) - rest upon the assumption that asset returns...

Options are financial derivatives that, conditional on the price of an underlyingasset, constitute a right to transfer the ownership of this underlying. Morespecifically, a European call and put options give their owner the right to buyand sell, respectively, at a fixed strike price at a given...

We extend the definition of a convex risk measure to a conditionalframework where additional information is available. We characterize these riskmeasures through the associated acceptance sets and prove a representationresult in terms of conditional expectations. As an example we consider the...