Updated A.Y. 2020-2021
Asset returns. Stylized facts: asymmetry, kurtosis and volatility clustering. Stochastic processes: stationarity, purely random processes (white noise). Random walks, with and without drifts.
- Review of prediction theory: forecasting schemes, forecast evaluation, forecast with nonstationary models: exponential smoothing.
- Volatility measurement and analysis
Autoregressive Conditional Heteroscedasticity (ARCH) models: specification, properties, maximum likelihood estimation, prediction. Extensions: ARCH in mean.
Generalized ARCH models and extensions: Integrated GARCH, Exponential GARCH models, GJR GARCH. Stochastic Volatility models
- Multivariate GARCH models. VECH, diagonal VECH and BEKK.
- Switching and state space models
- Risk measurement: Value at Risk and expected shortfall.