Download or read book Estimating Conditional Variances with Misspecified ARCH Models written by Daniel B. Nelson and published by . This book was released on 1991 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Filtering and Forecasting with Misspecified ARCH Models II written by Daniel B. Nelson and published by . This book was released on 1991 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: A companion paper (Nelson (1992)) showed that in data observed at high frequencies, an ARCH model may do a good job at estimating conditional variances, even when the ARCH model is severely misspecified. While such models may perform reasonably well at filtering (i.e., at estimating unobserved instantaneous conditional variances) they may perform disastrously at medium and long term forecasting. In this paper, we develop conditions under which a misspecified ARCH model successfully performs both tasks, filtering and forecasting. The key requirement (in addition to the conditions for consistent filtering) is that the ARCH model correctly specifies the functional form of the first two conditional moments of all state variables. We apply these results to a diffusion model employed in the options pricing literature, the stochastic volatility model of Hull and White (1987), Scott (1987), and Wiggins (1987).
Download or read book Asymptotic Filtering Theory for Multivariate Arch Models written by Daniel B. Nelson and published by . This book was released on 2008 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: ARCH models are widely used to estimate conditional variances and covariances in financial time series models. How successfully can ARCH models carry out this estimation when they are misspecified? How can ARCH models be optimally constructed? Nelson and Foster (1994) employed continuous record asymptotics to answer these questions in the univariate case. This paper considers the general multivariate case. Our results allow us, for example, to construct an asymptotically optimal ARCH model for estimating the conditional variance or conditional beta of a stock return given lagged returns on the stock, volume, market returns, implicit volatility from options contracts, and other relevant data. We also allow for time-varying shapes of conditional densities (e.g., `heteroskewticity` and `heterokurticity'). Examples are provided.
Download or read book The Time varying parameter Model as an Alternative to Arch for Modeling Changing Conditional Variance written by Charles R. Nelson and published by . This book was released on 1988 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main econometric issue in testing the Lucas hypothesis (1973) in a times series context is the estimation of the variance conditional on past information. The ARCH model, proposed by Engle (1982), is one way of specifying the conditional variance. But the assumption underlying the ARCH specification is ad-hoc. The existence of ARCH can sometimes be interpreted as evidence of misspecification. Under the assumption that a monetary policy regime is continuously changing, a time-varying-parameter (TVP) model is proposed for the monetary growth function. Based on Kalman filtering estimation of recursive forcast errors and their conditional variances, the Lucas hypothesis is tested for the U.S. economy (1964.1 - 1985.4) using monetary growth as an aggregate demand variable. The Lucas hypothesis is rejected in favor of Friedman's (1977) hypothesis: the conditional variance of monetary growth affects real output directly, not through the coefficients on the forcast error term in the Lucas-type output equation.
Download or read book Modelling Stock Market Volatility written by Peter H. Rossi and published by Elsevier. This book was released on 1996-11-19 with total page 505 pages. Available in PDF, EPUB and Kindle. Book excerpt: This essay collection focuses on the relationship between continuous time models and Autoregressive Conditionally Heteroskedastic (ARCH) models and applications. For the first time, Modelling Stock Market Volatility provides new insights about the links between these two models and new work on practical estimation methods for continuous time models. Featuring the pioneering scholarship of Daniel Nelson, the text presents research about the discrete time model, continuous time limits and optimal filtering of ARCH models, and the specification and estimation of continuous time processes. This work will lead to a rapid growth in their empirical application as they are increasingly subjected to routine specification testing. Provides for the first time new insights on the links between continuous time and ARCH models Collects seminal scholarship by some of the most renowned researchers in finance and econometrics Captures complex arguments underlying the approximation and proper statistical modelling of continuous time volatility dynamics
Download or read book Asypmtotic Filtering Theory for Univariate Arch Models written by Daniel B. Nelson and published by . This book was released on 1994 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds on this earlier work by deriving the asymptotic distribution of the measurement error. This allows us to approximate the measurement accuracy of ARCH conditional variance estimates and compare the efficiency achieved by different ARCH models. We are also able to characterize the relative importance of different kinds of misspecification; for example, we show that misspecifying conditional means adds only trivially (at least asymptotically) to measurement error, while other factors (for example, capturing the "leverage effect," accommodating thick tailed residuals, and correctly modelling the variability of the conditional variance process) are potentially much more important. Third, we are able to characterize a class of asymptotically optimal ARCH conditional variance estimates.
Download or read book Maximum Likelihood Estimation of Misspecified Models written by T. Fomby and published by Elsevier. This book was released on 2003-12-12 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: Comparative study of pure and pretest estimators for a possibly misspecified two-way error component model / Badi H. Baltagi, Georges Bresson, Alain Pirotte -- Estimation, inference, and specification testing for possibly misspecified quantile regression / Tae-Hwan Kim, Halbert White -- Quasimaximum likelihood estimation with bounded symmetric errors / Douglas Miller, James Eales, Paul Preckel -- Consistent quasi-maximum likelihood estimation with limited information / Douglas Miller, Sang-Hak Lee -- An examination of the sign and volatility switching arch models under alternative distributional assumptions / Mohamed F. Omran, Florin Avram -- estimating a linear exponential density when the weighting matrix and mean parameter vector are functionally related / Chor-yiu Sin -- Testing in GMM models without truncation / Timothy J. Vogelsang -- Bayesian analysis of misspecified models with fixed effects / Tiemen Woutersen -- Tests of common deterministic trend slopes applied to quarterly global temperature data / Thomas B. Fomby, Timothy J. Vogelsang -- The sandwich estimate of variance / James W. Hardin -- Test statistics and critical values in selectivity models / R. Carter Hill, Lee C. Adkins, Keith A. Bender -- Introduction / Thomas B Fomby, R. Carter Hill.
Download or read book Filtering and Forecasting with Misspecified ARCH Models I written by Daniel B. Nelson and published by . This book was released on 1990 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Time Varying Parameter Model as an Alternative to Arch for Modeling Changing Conditional Variance written by Charles R. Nelson and published by . This book was released on 2010 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main econometric issue in testing the Lucas hypothesis (1973) in a times series context is the estimation of the variance conditional on past information. The ARCH model, proposed by Engle (1982), is one way of specifying the conditional variance. But the assumption underlying the ARCH specification is ad-hoc. The existence of ARCH can sometimes be interpreted as evidence of misspecification. Under the assumption that a monetary policy regime is continuously changing, a time-varying-parameter (TVP) model is proposed for the monetary growth function. Based on Kalman filtering estimation of recursive forcast errors and their conditional variances, the Lucas hypothesis is tested for the U.S. economy (1964.1 - 1985.4) using monetary growth as an aggregate demand variable. The Lucas hypothesis is rejected in favor of Friedman's (1977) hypothesis: the conditional variance of monetary growth affects real output directly, not through the coefficients on the forcast error term in the Lucas-type output equation.
Download or read book ARCH Models for Financial Applications written by Evdokia Xekalaki and published by John Wiley & Sons. This book was released on 2010-03-18 with total page 558 pages. Available in PDF, EPUB and Kindle. Book excerpt: Autoregressive Conditional Heteroskedastic (ARCH) processes are used in finance to model asset price volatility over time. This book introduces both the theory and applications of ARCH models and provides the basic theoretical and empirical background, before proceeding to more advanced issues and applications. The Authors provide coverage of the recent developments in ARCH modelling which can be implemented using econometric software, model construction, fitting and forecasting and model evaluation and selection. Key Features: Presents a comprehensive overview of both the theory and the practical applications of ARCH, an increasingly popular financial modelling technique. Assumes no prior knowledge of ARCH models; the basics such as model construction are introduced, before proceeding to more complex applications such as value-at-risk, option pricing and model evaluation. Uses empirical examples to demonstrate how the recent developments in ARCH can be implemented. Provides step-by-step instructive examples, using econometric software, such as Econometric Views and the G@RCH module for the Ox software package, used in Estimating and Forecasting ARCH Models. Accompanied by a CD-ROM containing links to the software as well as the datasets used in the examples. Aimed at readers wishing to gain an aptitude in the applications of financial econometric modelling with a focus on practical implementation, via applications to real data and via examples worked with econometrics packages.
Download or read book GARCH Models written by Christian Francq and published by John Wiley & Sons. This book was released on 2019-06-10 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a comprehensive and updated study of GARCH models and their applications in finance, covering new developments in the discipline This book provides a comprehensive and systematic approach to understanding GARCH time series models and their applications whilst presenting the most advanced results concerning the theory and practical aspects of GARCH. The probability structure of standard GARCH models is studied in detail as well as statistical inference such as identification, estimation, and tests. The book also provides new coverage of several extensions such as multivariate models, looks at financial applications, and explores the very validation of the models used. GARCH Models: Structure, Statistical Inference and Financial Applications, 2nd Edition features a new chapter on Parameter-Driven Volatility Models, which covers Stochastic Volatility Models and Markov Switching Volatility Models. A second new chapter titled Alternative Models for the Conditional Variance contains a section on Stochastic Recurrence Equations and additional material on EGARCH, Log-GARCH, GAS, MIDAS, and intraday volatility models, among others. The book is also updated with a more complete discussion of multivariate GARCH; a new section on Cholesky GARCH; a larger emphasis on the inference of multivariate GARCH models; a new set of corrected problems available online; and an up-to-date list of references. Features up-to-date coverage of the current research in the probability, statistics, and econometric theory of GARCH models Covers significant developments in the field, especially in multivariate models Contains completely renewed chapters with new topics and results Handles both theoretical and applied aspects Applies to researchers in different fields (time series, econometrics, finance) Includes numerous illustrations and applications to real financial series Presents a large collection of exercises with corrections Supplemented by a supporting website featuring R codes, Fortran programs, data sets and Problems with corrections GARCH Models, 2nd Edition is an authoritative, state-of-the-art reference that is ideal for graduate students, researchers, and practitioners in business and finance seeking to broaden their skills of understanding of econometric time series models.
Download or read book Modeling Time Varying Unconditional Variance by Means of a Free Knot Spline GARCH Model written by Oliver Old and published by Springer Nature. This book was released on 2022-07-27 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book addresses the problem of a time-varying unconditional variance of return processes utilizing a spline function. The knots of the spline functions are estimated as free parameters within a joined estimation process together with the parameters of the mean, the conditional variance and the spline function. With the help of this method, the knots are placed in regions where the unconditional variance is not smooth. The results are tested within an extensive simulation study and an empirical study employing the S&P500 index.
Download or read book Professional s Handbook of Financial Risk Management written by Lev Borodovsky and published by Elsevier. This book was released on 2000-02-25 with total page 817 pages. Available in PDF, EPUB and Kindle. Book excerpt: Professional's Handbook of Financial Risk Management is a major reference work in finance. A complete practical reference book covering all aspects of financial risk management including an in-depth look at operational risk management, regulation, risk-based capital, and risk adjusted performance measurement. The book focuses on practical financial risk management techniques and solutions, and is designed to guide the risk professional step-by-step through the implementation of a firm-wide risk management framework. This book covers the various roles of the risk management function. Rather than describing every possible role in exhaustive detail, the authors have provided a story line for each of the discussed topics, including practical issues that a risk manager needs to consider when tackling the subject, possible solutions to difficulties that might be encountered, background knowledge that is essential to know, and more intricate practices and techniques that are being used. By providing these fundamentals, the novice risk professional can gain a thorough understanding of the topic in question while the more experienced professional can use some of the more advanced concepts within the book. Thus the book can be used to broaden your own knowledge of the risk world, both by familiarizing yourself with areas in which you lack experience and by enhancing your knowledge in areas that you already have expertise. All authors are leaders in their field who between them have the expertise and knowledge, both practical and theoretical, to produce this definitive risk management guide. The editors of this book, Marc Lore and Lev Borodovsky, are senior financial risk managers at Sanwa Bank (International) London, and Credit Suisse First Boston, USA respectively. They also run The Global Association of Risk Professionals (GARP), the industry association for financial risk management practitioners and researchers. Endorsed by GARP - Global Association of Risk Professionals Authored and edited by leading financial markets risk professionals International in coverage; the concepts and methods covered are not specific to any country or institution, but rather to the risk management profession as a whole
Download or read book Handbook of Financial Time Series written by Torben Gustav Andersen and published by Springer Science & Business Media. This book was released on 2009-04-21 with total page 1045 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of Financial Time Series gives an up-to-date overview of the field and covers all relevant topics both from a statistical and an econometrical point of view. There are many fine contributions, and a preamble by Nobel Prize winner Robert F. Engle.
Download or read book A Practical Guide to Forecasting Financial Market Volatility written by Ser-Huang Poon and published by John Wiley & Sons. This book was released on 2005-08-19 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial market volatility forecasting is one of today's most important areas of expertise for professionals and academics in investment, option pricing, and financial market regulation. While many books address financial market modelling, no single book is devoted primarily to the exploration of volatility forecasting and the practical use of forecasting models. A Practical Guide to Forecasting Financial Market Volatility provides practical guidance on this vital topic through an in-depth examination of a range of popular forecasting models. Details are provided on proven techniques for building volatility models, with guide-lines for actually using them in forecasting applications.
Download or read book Closed Form Estimation of Finite Order ARCH Models written by Todd Prono and published by . This book was released on 2017 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Strong consistency and weak distributional convergence to highly non-Gaussian limits are established for closed-form, two stage least squares (TSLS) estimators for a class of ARCH(p) models. Conditions for these results include (relatively) mild moment existence criteria that are supported empirically by many (high frequency) financial returns. These conditions are not shared by competing closed-form estimators like OLS. Identification of these TSLS estimators depends on asymmetry, either in the model's rescaled errors or in the conditional variance function. Monte Carlo studies reveal TSLS estimation to sizably outperform quasi maximum likelihood estimation in (relatively) small samples. This outperformance is most pronounced when returns are heavily skewed.
Download or read book Journal of Econometrics written by and published by . This book was released on 1996 with total page 424 pages. Available in PDF, EPUB and Kindle. Book excerpt:
