Tests of International CAPM with Time-varying Convariances PDF Download

Author: Charles Engel
Publisher:
ISBN:
Category :
Languages : en
Pages : 66

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Author: Dimitri P. Bertsekas
Publisher:
ISBN: 9781886529267
Category : Mathematics
Languages : en
Pages : 543

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"The leading and most up-to-date textbook on the far-ranging algorithmic methododogy of Dynamic Programming, which can be used for optimal control, Markovian decision problems, planning and sequential decision making under uncertainty, and discrete/combinatorial optimization. The treatment focuses on basic unifying themes, and conceptual foundations. It illustrates the versatility, power, and generality of the method with many examples and applications from engineering, operations research, and other fields. It also addresses extensively the practical application of the methodology, possibly through the use of approximations, and provides an extensive treatment of the far-reaching methodology of Neuro-Dynamic Programming/Reinforcement Learning. The first volume is oriented towards modeling, conceptualization, and finite-horizon problems, but also includes a substantive introduction to infinite horizon problems that is suitable for classroom use. The second volume is oriented towards mathematical analysis and computation, treats infinite horizon problems extensively, and provides an up-to-date account of approximate large-scale dynamic programming and reinforcement learning. The text contains many illustrations, worked-out examples, and exercises."--Publisher's website.

Author: Riccardo Rebonato
Publisher: John Wiley & Sons
ISBN: 0470091401
Category : Business & Economics
Languages : en
Pages : 864

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In Volatility and Correlation 2nd edition: The Perfect Hedger and the Fox, Rebonato looks at derivatives pricing from the angle of volatility and correlation. With both practical and theoretical applications, this is a thorough update of the highly successful Volatility & Correlation – with over 80% new or fully reworked material and is a must have both for practitioners and for students. The new and updated material includes a critical examination of the ‘perfect-replication’ approach to derivatives pricing, with special attention given to exotic options; a thorough analysis of the role of quadratic variation in derivatives pricing and hedging; a discussion of the informational efficiency of markets in commonly-used calibration and hedging practices. Treatment of new models including Variance Gamma, displaced diffusion, stochastic volatility for interest-rate smiles and equity/FX options. The book is split into four parts. Part I deals with a Black world without smiles, sets out the author’s ‘philosophical’ approach and covers deterministic volatility. Part II looks at smiles in equity and FX worlds. It begins with a review of relevant empirical information about smiles, and provides coverage of local-stochastic-volatility, general-stochastic-volatility, jump-diffusion and Variance-Gamma processes. Part II concludes with an important chapter that discusses if and to what extent one can dispense with an explicit specification of a model, and can directly prescribe the dynamics of the smile surface. Part III focusses on interest rates when the volatility is deterministic. Part IV extends this setting in order to account for smiles in a financially motivated and computationally tractable manner. In this final part the author deals with CEV processes, with diffusive stochastic volatility and with Markov-chain processes. Praise for the First Edition: “In this book, Dr Rebonato brings his penetrating eye to bear on option pricing and hedging.... The book is a must-read for those who already know the basics of options and are looking for an edge in applying the more sophisticated approaches that have recently been developed.” —Professor Ian Cooper, London Business School “Volatility and correlation are at the very core of all option pricing and hedging. In this book, Riccardo Rebonato presents the subject in his characteristically elegant and simple fashion...A rare combination of intellectual insight and practical common sense.” —Anthony Neuberger, London Business School

Author: Jau-Lian Jeng
Publisher: Springer
ISBN: 3319741926
Category : Business & Economics
Languages : en
Pages : 277

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This book analyzes the verification of empirical asset pricing models when returns of securities are projected onto a set of presumed (or observed) factors. Particular emphasis is placed on the verification of essential factors and features for asset returns through model search approaches, in which non-diversifiability and statistical inferences are considered. The discussion reemphasizes the necessity of maintaining a dichotomy between the nondiversifiable pricing kernels and the individual components of stock returns when empirical asset pricing models are of interest. In particular, the model search approach (with this dichotomy emphasized) for empirical model selection of asset pricing is applied to discover the pricing kernels of asset returns.

Author: Chris Brooks
Publisher: Cambridge University Press
ISBN: 052169468X
Category : Business & Economics
Languages : en
Pages : 672

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This best-selling introduction to econometrics is specifically written for finance students. The new edition builds on the successful data- and problem-driven approach of the first edition, giving students the skills to estimate and interpret models while developing an intuitive grasp of underlying theoretical concepts.

Author: James Ming Chen
Publisher: Springer
ISBN: 3319634658
Category : Business & Economics
Languages : en
Pages : 293

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This book rehabilitates beta as a definition of systemic risk by using particle physics to evaluate discrete components of financial risk. Much of the frustration with beta stems from the failure to disaggregate its discrete components; conventional beta is often treated as if it were "atomic" in the original Greek sense: uncut and indivisible. By analogy to the Standard Model of particle physics theory's three generations of matter and the three-way interaction of quarks, Chen divides beta as the fundamental unit of systemic financial risk into three matching pairs of "baryonic" components. The resulting econophysics of beta explains no fewer than three of the most significant anomalies and puzzles in mathematical finance. Moreover, the model's three-way analysis of systemic risk connects the mechanics of mathematical finance with phenomena usually attributed to behavioral influences on capital markets. Adding consideration of volatility and correlation, and of the distinct cash flow and discount rate components of systematic risk, harmonizes mathematical finance with labor markets, human capital, and macroeconomics.

Author: Robert Engle
Publisher: Princeton University Press
ISBN: 1400830192
Category : Business & Economics
Languages : en
Pages : 176

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Financial markets respond to information virtually instantaneously. Each new piece of information influences the prices of assets and their correlations with each other, and as the system rapidly changes, so too do correlation forecasts. This fast-evolving environment presents econometricians with the challenge of forecasting dynamic correlations, which are essential inputs to risk measurement, portfolio allocation, derivative pricing, and many other critical financial activities. In Anticipating Correlations, Nobel Prize-winning economist Robert Engle introduces an important new method for estimating correlations for large systems of assets: Dynamic Conditional Correlation (DCC). Engle demonstrates the role of correlations in financial decision making, and addresses the economic underpinnings and theoretical properties of correlations and their relation to other measures of dependence. He compares DCC with other correlation estimators such as historical correlation, exponential smoothing, and multivariate GARCH, and he presents a range of important applications of DCC. Engle presents the asymmetric model and illustrates it using a multicountry equity and bond return model. He introduces the new FACTOR DCC model that blends factor models with the DCC to produce a model with the best features of both, and illustrates it using an array of U.S. large-cap equities. Engle shows how overinvestment in collateralized debt obligations, or CDOs, lies at the heart of the subprime mortgage crisis--and how the correlation models in this book could have foreseen the risks. A technical chapter of econometric results also is included. Based on the Econometric and Tinbergen Institutes Lectures, Anticipating Correlations puts powerful new forecasting tools into the hands of researchers, financial analysts, risk managers, derivative quants, and graduate students.

Author: William H. Branson
Publisher: University of Chicago Press
ISBN: 0226071383
Category : Reference
Languages : en
Pages : 396

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Since the five largest industrial democracies concluded the Plaza Agreement in 1985, the theory and practice of international economic policy coordination has become the subject of spirited academic and public-policy debate. While some view policy coordination as crucial for the construction of an improved international monetary system, others fear that it risks delaying or weakening the implementation of macroeconomic and structural policies. In these papers and comments, prominent international economists consider past and present interpretations of the meaning of international policy coordination; conditions necessary for coordination to be beneficial both to the direct participants and the global economy; influential factors for the quantitative impact of coordination; obstacles to coordination; the most—and least—effective methods of coordination; and future directions of the coordination process, including processes associated with greater fixity of exchange rates. These studies will be readily accessible to policymakers, while offering sophisticated analyses to interested scholars of the global economy.

Author: James Ming Chen
Publisher: Springer
ISBN: 1137544643
Category : Business & Economics
Languages : en
Pages : 345

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This survey of portfolio theory, from its modern origins through more sophisticated, “postmodern” incarnations, evaluates portfolio risk according to the first four moments of any statistical distribution: mean, variance, skewness, and excess kurtosis. In pursuit of financial models that more accurately describe abnormal markets and investor psychology, this book bifurcates beta on either side of mean returns. It then evaluates this traditional risk measure according to its relative volatility and correlation components. After specifying a four-moment capital asset pricing model, this book devotes special attention to measures of market risk in global banking regulation. Despite the deficiencies of modern portfolio theory, contemporary finance continues to rest on mean-variance optimization and the two-moment capital asset pricing model. The term postmodern portfolio theory captures many of the advances in financial learning since the original articulation of modern portfolio theory. A comprehensive approach to financial risk management must address all aspects of portfolio theory, from the beautiful symmetries of modern portfolio theory to the disturbing behavioral insights and the vastly expanded mathematical arsenal of the postmodern critique. Mastery of postmodern portfolio theory’s quantitative tools and behavioral insights holds the key to the efficient frontier of risk management.

Author: Sebastian Wilde
Publisher: GRIN Verlag
ISBN: 3346707598
Category : Business & Economics
Languages : en
Pages : 29

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Seminar paper from the year 2021 in the subject Economics - Finance, grade: 1,3, University of Hagen (Fakultät für Wirtschaftswissenschaft, Lehrstuhl für Angewandte Statistik), language: English, abstract: The CAPM provides a single state, single factor, general equilibrium theory of the risk-return relation. However, in the 1960s, Mandelbrot (1963) already observed stock returns to have a very peaked distribution with heavy tails and also periods of persistent volatility, which contradicts the CAPM. In response to these observations, the Conditional CAPM (C-CAPM) has been discussed by several authors. In a C-CAPM investors can price an asset or portfolio conditional on the available information at a point in time. This is done by replacing the unconditional by conditional moments of returns. Statistically, processes of ”Generalized Autoregressive Conditional Heteroscedasticity” (GARCH) can capture the so called ”stylized facts”, some observed by Mandelbrot (1963). GARCH models were developed by Engle (1982) and Bollerslev (1986) and try to model time-varying second moments of asset returns. If a GARCH process is assumed for the disturbance term in a C-CAPM, a GARCH-in mean model (GARCH-M) can be estimated, where the conditional variance or covariance impacts the conditional expectation of (excess) returns. The GARCH-M can model time-varying conditional moments, but also time-varying risk premia and the implied beta factor. As for this seminar paper, I mostly follow the comprehensive dissertation ”Das CAPM mit zeitabhängigen Beta-Faktoren” of Linnenbrink (1998) and the paper of Bollerslev et al. (1988). First, the theoretical foundations of the CAPM, the C-CAPM, GARCH processes and the GARCH-M extension are presented. Then, in the empirical part, I estimate a (univariate) GARCH-M representation of the C-CAPM. I compare its performance to a traditional CAPM with a single stock portfolio of an investor (selected stock: Tesla, Inc.).