Econometric Analysis of Financial Derivatives: An Overview

Chia-Lin Chang () and Michael McAleer

No 2014-31, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: One of the fastest growing areas in empirical finance, and also one of the least rigorously analyzed, especially from a financial econometrics perspective, is the econometric analysis of financial derivatives, which are typically complicated and difficult to analyze. The purpose of this special issue of the journal on “Econometric Analysis of Financial Derivatives” is to highlight several areas of research by leading academics in which novel econometric, financial econometric, mathematical finance and empirical finance methods have contributed significantly to the econometric analysis of financial derivatives, including market-based estimation of stochastic volatility models, the fine structure of equity-index option dynamics, leverage and feedback effects in multifactor Wishart stochastic volatility for option pricing, option pricing with non-Gaussian scaling and infinite-state switching volatility, stock return and cash flow predictability: the role of volatility risk, the long and the short of the risk-return trade-off, What’s beneath the surface? option pricing with multifrequency latent states, bootstrap score tests for fractional integration in heteroskedastic ARFIMA models, with an application to price dynamics in commodity spot and futures markets, a stochastic dominance approach to financial risk management strategies, empirical evidence on the importance of aggregation, asymmetry, and jumps for volatility prediction, non-linear dynamic model of the variance risk premium, pricing with finite dimensional dependence, quanto option pricing in the presence of fat tails and asymmetric dependence, smile from the past: a general option pricing framework with multiple volatility and leverage components, COMFORT: A common market factor non-Gaussian returns model, divided governments and futures prices, and model-based pricing for financial derivatives keywords: Hedge Fund Diversi_cation, Spillover Index, Markowitz Analaysis, Downside Risk, CVaR, Draw-Down.

Keywords: Stochastic volatility; Switching volatility; Volatility risk; Option pricing dynamics; Futures prices; Fractional integration; Stochastic dominance; Variance risk premium; Fat tails; Leverage and asymmetry; Divided governments. (search for similar items in EconPapers)
JEL-codes: C55 C58 G23 G32 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2014
New Economics Papers: this item is included in nep-ore and nep-rmg
Note: The Guest Co-editors wish to thank the Editors of the Journal of Econometrics for their support and encouragement, and the referees for their timely and very helpful comments and suggestions on the papers comprising the special issue. For financial support, the first author wishes to thank the National Science Council, Taiwan, and the .second author wishes to acknowledge the Australian Research Council and the National Science Council, Taiwan.
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https://eprints.ucm.es/id/eprint/27822/1/1431.pdf (application/pdf)

Related works:
Journal Article: Econometric analysis of financial derivatives: An overview (2015)
Working Paper: Econometric Analysis of Financial Derivatives: An Overview (2014)
Working Paper: Econometric Analysis of Financial Derivatives: An Overview (2014)
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