March 17, 2018

Download e-book for iPad: Multifractal Volatility: Theory, Forecasting, and Pricing by Laurent E. Calvet

By Laurent E. Calvet

ISBN-10: 0080559964

ISBN-13: 9780080559964

ISBN-10: 0121500136

ISBN-13: 9780121500139

Calvet and Fisher current a strong, new approach for volatility forecasting that pulls on insights from using multifractals within the traditional sciences and arithmetic and gives a unified remedy of using multifractal options in finance. a wide current literature (e.g., Engle, 1982; Rossi, 1995) types volatility as a regular of previous shocks, almost certainly with a noise part. This procedure frequently has hassle shooting sharp discontinuities and massive alterations in monetary volatility. Their study has proven the benefits of modelling volatility as topic to abrupt regime adjustments of heterogeneous periods. utilizing the instinct that a few fiscal phenomena are long-lasting whereas others are extra brief, they allow regimes to have various levels of patience. through drawing on insights from using multifractals within the traditional sciences and arithmetic, they convey easy methods to build high-dimensional regime-switching types which are effortless to estimate, and considerably outperform the very best conventional forecasting versions similar to GARCH. The target of Multifractal Volatility is to popularize the process via featuring those intriguing new advancements to a much broader viewers. They emphasize either theoretical and empirical purposes, starting with a mode that's simply obtainable and intuitive in early chapters, and increasing to the main rigorous continuous-time and equilibrium pricing formulations in ultimate chapters.

  • Presents a strong new strategy for forecasting volatility
  • Leads the reader intuitively from latest volatility ideas to the frontier of study during this box by means of best students at significant universities
  • The first complete publication on multifractal strategies in finance, a state-of-the-art box of research

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Read or Download Multifractal Volatility: Theory, Forecasting, and Pricing (Academic Press Advanced Finance) (Academic Press Advanced Finance) PDF

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Additional info for Multifractal Volatility: Theory, Forecasting, and Pricing (Academic Press Advanced Finance) (Academic Press Advanced Finance)

Sample text

The Japanese yen and British pound run from 1 June 1973 to 31 December 2002. S. dollar shortly after the demise of the Bretton Woods system, and our sample therefore starts on 1 June 1974. The Deutsche mark was replaced by the euro at the beginning of 1999, and the series ends on 31 December 1998. 2. S. S. S. S. 73 Notes: This table reports maximum likelihood estimates of binomial MSM for the four exchange rate series. The estimates are based on daily ¯ in the MSM specification. The likelihood function increases log returns in percent.

The table then shows correlations of the DM decomposition with decompositions from all three series. Correlations are generally strongest near the diagonal. 1 Comovement of Univariate Volatility Components 55 where L denotes the log-likelihood of univariate MSM. This specification, called the combined univariate, is an important building block of the bivariate model introduced in the next section. 3, we report empirical results for the combined univariate. Panel A shows ML estimates for the mark and yen series.

Multistep forecasts provide stronger empirical differences between the three models. Following Andersen and Bollerslev (1998a), the dependent variable is the sum of squared daily returns over n days, RVt,n = t 2 s=t−n+1 rs . 7, we report the results of the Mincer–Zarnowitz regression: RVt,n = γ0 + γ1 Et−n (RVt,n ) + ut for n = 20 days. 6. For each currency, the multifractal produces point estimates of γ0 and γ1 that are closest to their preferred values. We also accept the hypotheses γ0 = 0 and γ1 = 1 in all cases at the 5% confidence level.

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Multifractal Volatility: Theory, Forecasting, and Pricing (Academic Press Advanced Finance) (Academic Press Advanced Finance) by Laurent E. Calvet


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