Seasonal Stochastic Volatility

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Seasonal Stochastic Volatility

Author : Juan Arismendi-Zambrano
Publisher :
ISBN 13 :
Total Pages : 53 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Seasonal Stochastic Volatility by : Juan Arismendi-Zambrano

Download or read book Seasonal Stochastic Volatility written by Juan Arismendi-Zambrano and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many commodity markets contain a strong seasonal component not only at the price level, but also in volatility. In this paper, the importance of seasonal behavior in the volatility for the pricing of commodity options is analyzed. We propose a seasonally varying long-run mean variance process that is capable of capturing empirically observed patterns. Semi-closed form option valuation formulas are derived. We then empirically study the impact of the proposed seasonal stochastic volatility model on the pricing accuracy of natural gas futures options traded at the New York Mercantile Exchange (NYMEX) and corn futures options traded at the Chicago Board of Trade (CBOT). Our results demonstrate that allowing stochastic volatility to fluctuate seasonally significantly reduces pricing errors for these contracts.

Forecasting Realised Volatility Using a Long Memory Stochastic Volatility Model

Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (835 download)

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Book Synopsis Forecasting Realised Volatility Using a Long Memory Stochastic Volatility Model by :

Download or read book Forecasting Realised Volatility Using a Long Memory Stochastic Volatility Model written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Periodic Stochastic Volatility and Fat Tails

Author : Ilias Tsiakas
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Periodic Stochastic Volatility and Fat Tails by : Ilias Tsiakas

Download or read book Periodic Stochastic Volatility and Fat Tails written by Ilias Tsiakas and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article provides a comprehensive analysis of the size and statistical significance of the day of the week, month of the year, and holiday effects in daily stock index returns and volatility. We employ data from the Dow Jones Industrial Average (DJIA), the Samp;P 500, the Samp;P MidCap 400, and the Samp;P SmallCap 600 in order to test whether the seasonal patterns of medium and small firms are similar to those of large firms. Using formal hypothesis tests based on bootstrapping, we demonstrate that there are more significant calendar effects in volatility than in expected returns, especially for the two large cap indices. More importantly, we introduce the periodic stochastic volatility (PSV) model for characterizing the observed seasonal patterns of daily financial market volatility. We analyze the interaction between seasonal heteroskedasticity and fat tails by comparing the performance of Gaussian PSV and fat-tailed PSVt specifications to the plain vanilla SV and SVt benchmarks. Consistent with our model-free results, we find strong evidence of seasonal periodicity in volatility, which essentially eliminates the need for a fat-tailed conditional distribution, and is robust to the exclusion of the crash of 1987 outliers.

Stochastic Volatility

Author : Neil Shephard
Publisher : Oxford University Press, USA
ISBN 13 : 0199257205
Total Pages : 534 pages
Book Rating : 4.1/5 (992 download)

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Book Synopsis Stochastic Volatility by : Neil Shephard

Download or read book Stochastic Volatility written by Neil Shephard and published by Oxford University Press, USA. This book was released on 2005 with total page 534 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stochastic volatility is the main concept used in the fields of financial economics and mathematical finance to deal with time-varying volatility in financial markets. This work brings together some of the main papers that have influenced this field, andshows that the development of this subject has been highly multidisciplinary.

Seasonal Adjustment when Both Deterministic and Stochastic Seasonality are Present

Author : David A. Pierce
Publisher :
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (327 download)

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Book Synopsis Seasonal Adjustment when Both Deterministic and Stochastic Seasonality are Present by : David A. Pierce

Download or read book Seasonal Adjustment when Both Deterministic and Stochastic Seasonality are Present written by David A. Pierce and published by . This book was released on 1976 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Modeling Stochastic Volatility with Application to Stock Returns

Author : Mr.Noureddine Krichene
Publisher : International Monetary Fund
ISBN 13 : 1451854846
Total Pages : 30 pages
Book Rating : 4.4/5 (518 download)

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Book Synopsis Modeling Stochastic Volatility with Application to Stock Returns by : Mr.Noureddine Krichene

Download or read book Modeling Stochastic Volatility with Application to Stock Returns written by Mr.Noureddine Krichene and published by International Monetary Fund. This book was released on 2003-06-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: A stochastic volatility model where volatility was driven solely by a latent variable called news was estimated for three stock indices. A Markov chain Monte Carlo algorithm was used for estimating Bayesian parameters and filtering volatilities. Volatility persistence being close to one was consistent with both volatility clustering and mean reversion. Filtering showed highly volatile markets, reflecting frequent pertinent news. Diagnostics showed no model failure, although specification improvements were always possible. The model corroborated stylized findings in volatility modeling and has potential value for market participants in asset pricing and risk management, as well as for policymakers in the design of macroeconomic policies conducive to less volatile financial markets.

The Econometric Analysis of Seasonal Time Series

Author : Eric Ghysels
Publisher : Cambridge University Press
ISBN 13 : 9780521565882
Total Pages : 258 pages
Book Rating : 4.5/5 (658 download)

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Book Synopsis The Econometric Analysis of Seasonal Time Series by : Eric Ghysels

Download or read book The Econometric Analysis of Seasonal Time Series written by Eric Ghysels and published by Cambridge University Press. This book was released on 2001-06-18 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: Eric Ghysels and Denise R. Osborn provide a thorough and timely review of the recent developments in the econometric analysis of seasonal economic time series, summarizing a decade of theoretical advances in the area. The authors discuss the asymptotic distribution theory for linear nonstationary seasonal stochastic processes. They also cover the latest contributions to the theory and practice of seasonal adjustment, together with its implications for estimation and hypothesis testing. Moreover, a comprehensive analysis of periodic models is provided, including stationary and nonstationary cases. The book concludes with a discussion of some nonlinear seasonal and periodic models. The treatment is designed for an audience of researchers and advanced graduate students.

Time-Variations in Commodity Price Jumps

Author : Laszlo Diewald
Publisher :
ISBN 13 :
Total Pages : 32 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Time-Variations in Commodity Price Jumps by : Laszlo Diewald

Download or read book Time-Variations in Commodity Price Jumps written by Laszlo Diewald and published by . This book was released on 2019 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study jumps in commodity prices. Unlike assumed in existing models of commodity price dynamics, a simple analysis of the data reveals that the probability of tail events is not constant but depends on the time of the year, i.e. exhibits seasonality. We propose a stochastic volatility jump-diffusion model to capture this seasonal variation. Applying the Markov Chain Monte Carlo (MCMC) methodology, we estimate our model using 20 years of futures data from four different commodity markets. We find strong statistical evidence to suggest that our model with seasonal jump intensity outperforms models featuring a constant jump intensity. To demonstrate the practical relevance of our findings, we show that our model typically improves Value-at-Risk (VaR) forecasts.

Handbook of Economic Forecasting

Author : G. Elliott
Publisher : Elsevier
ISBN 13 : 0080460674
Total Pages : 1071 pages
Book Rating : 4.0/5 (84 download)

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Book Synopsis Handbook of Economic Forecasting by : G. Elliott

Download or read book Handbook of Economic Forecasting written by G. Elliott and published by Elsevier. This book was released on 2006-05-30 with total page 1071 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research on forecasting methods has made important progress over recent years and these developments are brought together in the Handbook of Economic Forecasting. The handbook covers developments in how forecasts are constructed based on multivariate time-series models, dynamic factor models, nonlinear models and combination methods. The handbook also includes chapters on forecast evaluation, including evaluation of point forecasts and probability forecasts and contains chapters on survey forecasts and volatility forecasts. Areas of applications of forecasts covered in the handbook include economics, finance and marketing. *Addresses economic forecasting methodology, forecasting models, forecasting with different data structures, and the applications of forecasting methods *Insights within this volume can be applied to economics, finance and marketing disciplines

Deterministic and Stochastic Methods for Estimation of Intra-Day Seasonal Components with High Frequency Data

Author : Claudio Morana
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Deterministic and Stochastic Methods for Estimation of Intra-Day Seasonal Components with High Frequency Data by : Claudio Morana

Download or read book Deterministic and Stochastic Methods for Estimation of Intra-Day Seasonal Components with High Frequency Data written by Claudio Morana and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We introduce a model for the analysis of intraday volatility of exchange rates returns, based on the structural time series methodology. The stochastic seasonal component is useful to model intra-day effects which may be different from one day to the other. The model is estimated with high frequency data for the Deutsche mark-U.S. dollar exchange rates for 1993 and 1996. The structural time series model performs well in terms of coherence with the theoretical aggregation properties of GARCH models, it is effective both in terms of one-period and multi-period forecasting ability and in terms of describing reactions to announcements of US employment reports.

Real Options in Energy and Commodity Markets

Author : Nicola Secomandi
Publisher : World Scientific-Now Publisher
ISBN 13 : 9789813149403
Total Pages : 241 pages
Book Rating : 4.1/5 (494 download)

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Book Synopsis Real Options in Energy and Commodity Markets by : Nicola Secomandi

Download or read book Real Options in Energy and Commodity Markets written by Nicola Secomandi and published by World Scientific-Now Publisher. This book was released on 2017 with total page 241 pages. Available in PDF, EPUB and Kindle. Book excerpt: The field of real options is concerned with the management and financial valuation of operational flexibility in business endeavors. From the very outset, energy and commodity markets -- which play fundamental roles in the worldwide economy -- have provided a relevant context for real option analysis, both in theory and practice. This volume is a collection of six chapters covering recent research on real options in energy and commodity markets, reflecting the significance of these markets for real option analysis. The volume is divided into two parts -- the first on theory and the second on methods and applications. The two chapters in the first part of the book respectively address commodity storage and the concept of convenience yield, and how the management of real options can be impacted by the trader's own market decisions in the context of commodity shipping. The four chapters in the second part of the book propose and apply real option models in various domains -- modeling the evolution of futures prices of emission certificates; managing copper extraction illustrated with an application to a project at Codelco, Chile, the largest copper producer in the world; the core ideas behind real option analysis in the context of the merchant management of hydrocarbon cracking operations; and optimizing the portfolio of contracts that oil refineries use to market their gasoline production.

Computational Finance 1999

Author : Yaser S. Abu-Mostafa
Publisher : MIT Press
ISBN 13 : 9780262511070
Total Pages : 744 pages
Book Rating : 4.5/5 (11 download)

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Book Synopsis Computational Finance 1999 by : Yaser S. Abu-Mostafa

Download or read book Computational Finance 1999 written by Yaser S. Abu-Mostafa and published by MIT Press. This book was released on 2000 with total page 744 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book covers the techniques of data mining, knowledge discovery, genetic algorithms, neural networks, bootstrapping, machine learning, and Monte Carlo simulation. Computational finance, an exciting new cross-disciplinary research area, draws extensively on the tools and techniques of computer science, statistics, information systems, and financial economics. This book covers the techniques of data mining, knowledge discovery, genetic algorithms, neural networks, bootstrapping, machine learning, and Monte Carlo simulation. These methods are applied to a wide range of problems in finance, including risk management, asset allocation, style analysis, dynamic trading and hedging, forecasting, and option pricing. The book is based on the sixth annual international conference Computational Finance 1999, held at New York University's Stern School of Business.

Essays on Option Market and Testing for Seasonal Unit Roots

Author : Jaesun Noh
Publisher :
ISBN 13 :
Total Pages : 282 pages
Book Rating : 4.:/5 (318 download)

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Book Synopsis Essays on Option Market and Testing for Seasonal Unit Roots by : Jaesun Noh

Download or read book Essays on Option Market and Testing for Seasonal Unit Roots written by Jaesun Noh and published by . This book was released on 1993 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Stochastic Volatility

Author : Torben G. Andersen
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (839 download)

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Book Synopsis Stochastic Volatility by : Torben G. Andersen

Download or read book Stochastic Volatility written by Torben G. Andersen and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Bayesian Modeling and Forecasting of 24-Hour High-Frequency Volatility

Author : Jonathan R. Stroud
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Bayesian Modeling and Forecasting of 24-Hour High-Frequency Volatility by : Jonathan R. Stroud

Download or read book Bayesian Modeling and Forecasting of 24-Hour High-Frequency Volatility written by Jonathan R. Stroud and published by . This book was released on 2014 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates models of high frequency index futures returns using 'around the clock' 5-minute returns that incorporate the following key features: multiple persistent stochastic volatility factors, jumps in prices and volatilities, seasonal components capturing time of the day patterns, correlations between return and volatility shocks, and announcement effects. We develop an integrated MCMC approach to estimate interday and intraday parameters and states using high-frequency data without resorting to various aggregation measures like realized volatility. We provide a case study using financial crisis data from 2007 to 2009, and use particle filters to construct likelihood functions for model comparison and out-of-sample forecasting from 2009 to 2012. We show that our approach improves realized volatility forecasts by up to 50% over existing benchmarks.

The Foreign Exchange Market

Author : Richard T. Baillie
Publisher : Cambridge University Press
ISBN 13 : 9780521396905
Total Pages : 280 pages
Book Rating : 4.3/5 (969 download)

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Book Synopsis The Foreign Exchange Market by : Richard T. Baillie

Download or read book The Foreign Exchange Market written by Richard T. Baillie and published by Cambridge University Press. This book was released on 1989 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: The flotation of exchange rates in the early 1970s saw a significant increase in the importance of foreign exchange markets and in the interest shown in them. Apart from the consequent institutional changes, this period also witnessed a revolution in macroeconomic analysis and finance theory based on the concept of rational expectations. This book provides an integrated approach to recent developments in the understanding of foreign exchange markets. It begins by charting the institutional background and looks at the recent history of movements in some of the major exchange rates. The theoretical sections focus on the economic and finance theory of the asset market approach, the macroeconomic models developed from this approach, and on interest rate parity theory. The empirical chapters draw on the authors' own research from a high quality set of exchange rate and interest rate data. The statistical properties of exchange rates are analysed; the relationship between spot and forward rates is examined; and the modelling and impact of new information on the forward and spot relationship is considered. The final chapter is devoted to the estimation and testing of exchange rate models.

Affine Diffusion Modeling of Commodity Futures Price Term Structure

Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (656 download)

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Book Synopsis Affine Diffusion Modeling of Commodity Futures Price Term Structure by :

Download or read book Affine Diffusion Modeling of Commodity Futures Price Term Structure written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Diffusion modeling of commodity price behavior is important for commodity risk management. This research seeks to improve upon the existing commodity diffusion models by incorporating stochastic volatility and seasonality through the affine diffusion framework. In particular, it evaluates affine diffusion models' performance at modeling commodity futures price term structure. Six affine diffusion models are studied in this research. They are one, two, three-factor Gaussian model and one, two, three-factor stochastic volatility model with a single stochastic volatility factor. Seasonality is modeled by allowing the forcing terms of the instantaneous drift and the instantaneous covariance to be seasonal. Model estimation is done through Q-MLE, for which the state variables are filtered through the Kalman Filter. To build the connection between affine diffusion models and known market regularities, affine state variables are interpreted. Factor interpretations used include the log of the spot price, a spot drift factor, and a spot variance factor. Empirical analysis covers models' performance at fitting and predicting futures price term structures; behavior of the interpretable models; and model stability. Empirical studies are applied to the corn and the unleaded gasoline markets. The following conclusions can be drawn from both markets: 1. For the purpose of modeling futures price dynamics alone, stochastic volatility models have no advantage over Gaussian models; 2. At least two factors are needed to adequately model commodity futures price term structures; the advantage of three-factor models, which is better capturing the curvature of the term structures, become evident under extreme market conditions; 3. State independent seasonality modeling is effective under most market conditions, but under extreme market conditions, seasonality can be mis-represented and it is the source of big measurement errors and prediction errors. 4. Two and three-factor affine diffusio.