In: Journal of forecasting, 2006, vol. 25, no. 8, p. 579–600
We propose a simple class of multivariate GARCH models, allowing for time-varying conditional correlations. Estimates for time-varying conditional correlations are constructed by means of a convex combination of averaged correlations (across all series) and dynamic realized (historical) correlations. Our model is very parsimonious. Estimation is computationally feasible in very large dimensions...
|
This paper proposes a two factor model for asset pricing. We formulate a model of asset returns that in addition to the traditional market return term includes also the square of the market return to account for risk originating from coskewness with the market portofolio. The quadratic term is able to account for heterogeneities across portfolios. We conclude that the extra term is significant...
|
In this paper we propose an algorithm for pricing derivatives written on electricity in an incomplete market setting. A discrete time model for price dynamics which embodies the main features of electricity price revealed by simple time series analysis is considered. We use jointly Binomial and Monte Carlo methods for pricing under a risk-neutral measure of which we prove the existence.
|
