Asset Price Dynamics Volatility and Prediction

This book shows how current and recent market prices convey information about the probability distributions that govern future prices.

Author: Stephen J. Taylor

Publisher: Princeton University Press

ISBN: 1400839254

Category: Business & Economics

Page: 544

View: 144

This book shows how current and recent market prices convey information about the probability distributions that govern future prices. Moving beyond purely theoretical models, Stephen Taylor applies methods supported by empirical research of equity and foreign exchange markets to show how daily and more frequent asset prices, and the prices of option contracts, can be used to construct and assess predictions about future prices, their volatility, and their probability distributions. Stephen Taylor provides a comprehensive introduction to the dynamic behavior of asset prices, relying on finance theory and statistical evidence. He uses stochastic processes to define mathematical models for price dynamics, but with less mathematics than in alternative texts. The key topics covered include random walk tests, trading rules, ARCH models, stochastic volatility models, high-frequency datasets, and the information that option prices imply about volatility and distributions. Asset Price Dynamics, Volatility, and Prediction is ideal for students of economics, finance, and mathematics who are studying financial econometrics, and will enable researchers to identify and apply appropriate models and methods. It will likewise be a valuable resource for quantitative analysts, fund managers, risk managers, and investors who seek realistic expectations about future asset prices and the risks to which they are exposed.

Implicit Volatilities

Using the BS model the volatility estimates from reported option prices vary systematically with the value of K and τ. ... However non-trivial pricing puzzles still remain and even if the dynamics of underlying assets are quite similar, ...

Author: Robert Schott


ISBN: 3836621118

Category: Business & Economics

Page: 83

View: 290

Inhaltsangabe:Introduction: Volatility is a crucial factor widely followed in the financial world. It is not only the single unknown determinant in the Black & Scholes model to derive a theoretical option price, but also the fact that portfolios can be diversified and hedged with volatility makes it a topic, which is crucial to understand for market participants comprising a wide group of private investors and professional traders as well as issuers of derivative products upon volatility. The year 1973 was in several respects a crucial year for implicit volatility. The breakdown of the Bretton-Wood-System paved the way for derivative instruments, because of the beginning era of floating currencies. Furthermore Fischer Black and Myron Samuel Scholes published in 1973 the ground breaking Black & Scholes (BS) model in the Journal of Political Economy. This model was adopted in 1975 at the Chicago Board Options Exchange (CBOE), which also was founded in the year 1973, for pricing options. Especially since 1973 volatility has become a tremendously debated topic in financial literature with continually new insights in short-time periods. Volatility is a central feature of option-pricing models and emerged per se as an independent asset class for investment purposes. The implicit volatility, the topic of the thesis, is a market indicator widely used by all option market practitioners. In the thesis the focus lies on the implicit (implied) volatility (IV). It is the estimation of the volatility that perfectly explains the option price, given all other variables, including the price of the underlying asset in context of the BS model. At the start the BS model, which is the theoretical basic of model-specific IV models, and its variations are discussed. In the concept of volatility IV is defined and the way it is computed is given as well as a look on historical volatility. Afterwards the implied volatility surface (IVS) is presented, which is a non-flat surface, a contradiction to the ideal BS assumptions. Furthermore, reasons of the change of the implied volatility function (IVF) and the term structure are discussed. The model specific IV model is then compared to other possible volatility forecast models. Then the model-free IV methodology is presented with a step-to-step example of the calculation of the widely followed CBOE Volatility Index VIX. Finally the VIX term structure and the relevance of the IV in practice are shown up. To ensure a good [...]

Chaos and Complexity Theory in World Politics

... 19, 235–254. doi:10.1002/1099131X(200007)19:4<235::AIDFOR772>3.0.CO;2-L Taylor, S. (1986). Modeling financial time series. New York: Wiley and Sons. Taylor, S.J. (2005). Asset price dynamics, volatility and prediction.

Author: Erçetin, ?efika ?ule

Publisher: IGI Global

ISBN: 1466660716

Category: Political Science

Page: 374

View: 644

As an important research field in mathematics, chaos theory impacts many different disciplines such as physics, engineering, economics, and biology. Most recently, however, chaos theory has also been applied to the social sciences, helping to explain the complex and interdependent nature of international politics. Chaos and Complexity Theory in World Politics aims to bring attention to new developments in global politics within the last few years. Demonstrating various issues in international relations and the application of chaos theory within this field, this publication serves as an essential reference for researchers and professionals, as well as useful educational material for academicians and students.

Handbook of Financial Markets Dynamics and Evolution

Taylor, S., Asset Price Dynamics, Volatility, and Prediction, Princeton University Press, 2005. Taylor, M., and H. Allen, The use of technical analysis in the foreign exchange market, Journal of International Money and Finance, 1992, ...

Author: Thorsten Hens

Publisher: Elsevier

ISBN: 9780080921433

Category: Business & Economics

Page: 608

View: 739

The models of portfolio selection and asset price dynamics in this volume seek to explain the market dynamics of asset prices. Presenting a range of analytical, empirical, and numerical techniques as well as several different modeling approaches, the authors depict the state of debate on the market selection hypothesis. By explicitly assuming the heterogeneity of investors, they present models that are descriptive and normative as well, making the volume useful for both finance theorists and financial practitioners. * Explains the market dynamics of asset prices, offering insights about asset management approaches * Assumes a heterogeneity of investors that yields descriptive and normative models of portfolio selections and asset pricing dynamics

Computational Linguistics and Intelligent Text Processing

Taylor, S.J.: Introduction to asset price dynamics, volatility, and prediction. In: Asset Price Dynamics, Volatility, and Prediction. Introductory Chapters. Princeton University Press, Princeton (2007) 10. Wang, X., McCallum, A.: Topics ...

Author: Alexander Gelbukh

Publisher: Springer Science & Business Media

ISBN: 3642121152

Category: Computers

Page: 760

View: 711

This book constitutes the proceedings of the 11th International Conference on Computational Linguistics and Intelligent Text Processing, held in Iaşi, Romania, in March 2010. The 60 paper included in the volume were carefully reviewed and selected from numerous submissions. The book also includes 3 invited papers. The topics covered are: lexical resources, syntax and parsing, word sense disambiguation and named entity recognition, semantics and dialog, humor and emotions, machine translation and multilingualism, information extraction, information retrieval, text categorization and classification, plagiarism detection, text summarization, and speech generation.

Handbook of High Frequency Trading and Modeling in Finance

1997, The incremental volatility information in one million foreign exchange quotations, Journal of Empirical Finance 4, 317–340. 73. Taylor, S.J. 2005, Asset Price Dynamics, Volatility, and Prediction, Princeton University Press. 74.

Author: Ionut Florescu

Publisher: John Wiley & Sons

ISBN: 1118593324

Category: Business & Economics

Page: 456

View: 380

Reflecting the fast pace and ever-evolving nature of the financial industry, the Handbook of High-Frequency Trading and Modeling in Finance details how high-frequency analysis presents new systematic approaches to implementing quantitative activities with high-frequency financial data. Introducing new and established mathematical foundations necessary to analyze realistic market models and scenarios, the handbook begins with a presentation of the dynamics and complexity of futures and derivatives markets as well as a portfolio optimization problem using quantum computers. Subsequently, the handbook addresses estimating complex model parameters using high-frequency data. Finally, the handbook focuses on the links between models used in financial markets and models used in other research areas such as geophysics, fossil records, and earthquake studies. The Handbook of High-Frequency Trading and Modeling in Finance also features: • Contributions by well-known experts within the academic, industrial, and regulatory fields • A well-structured outline on the various data analysis methodologies used to identify new trading opportunities • Newly emerging quantitative tools that address growing concerns relating to high-frequency data such as stochastic volatility and volatility tracking; stochastic jump processes for limit-order books and broader market indicators; and options markets • Practical applications using real-world data to help readers better understand the presented material The Handbook of High-Frequency Trading and Modeling in Finance is an excellent reference for professionals in the fields of business, applied statistics, econometrics, and financial engineering. The handbook is also a good supplement for graduate and MBA-level courses on quantitative finance, volatility, and financial econometrics. Ionut Florescu, PhD, is Research Associate Professor in Financial Engineering and Director of the Hanlon Financial Systems Laboratory at Stevens Institute of Technology. His research interests include stochastic volatility, stochastic partial differential equations, Monte Carlo Methods, and numerical methods for stochastic processes. Dr. Florescu is the author of Probability and Stochastic Processes, the coauthor of Handbook of Probability, and the coeditor of Handbook of Modeling High-Frequency Data in Finance, all published by Wiley. Maria C. Mariani, PhD, is Shigeko K. Chan Distinguished Professor in Mathematical Sciences and Chair of the Department of Mathematical Sciences at The University of Texas at El Paso. Her research interests include mathematical finance, applied mathematics, geophysics, nonlinear and stochastic partial differential equations and numerical methods. Dr. Mariani is the coeditor of Handbook of Modeling High-Frequency Data in Finance, also published by Wiley. H. Eugene Stanley, PhD, is William Fairfield Warren Distinguished Professor at Boston University. Stanley is one of the key founders of the new interdisciplinary field of econophysics, and has an ISI Hirsch index H=128 based on more than 1200 papers. In 2004 he was elected to the National Academy of Sciences. Frederi G. Viens, PhD, is Professor of Statistics and Mathematics and Director of the Computational Finance Program at Purdue University. He holds more than two dozen local, regional, and national awards and he travels extensively on a world-wide basis to deliver lectures on his research interests, which range from quantitative finance to climate science and agricultural economics. A Fellow of the Institute of Mathematics Statistics, Dr. Viens is the coeditor of Handbook of Modeling High-Frequency Data in Finance, also published by Wiley.


... portfolios for a class of super- and subexponentially decaying assets return distributions Quant. ... Asset Price Dynamics, Volatility and Prediction, 2005 (Princeton University Press: Princeton, NJ) Taylor, S J , ...

Author: M. A. H. Dempster

Publisher: CRC Press

ISBN: 1498712339

Category: Business & Economics

Page: 703

View: 761

Since a major source of income for many countries comes from exporting commodities, price discovery and information transmission between commodity futures markets are key issues for continued economic development. This book covers the fundamental theory of and derivatives pricing for major commodity markets as well as the interaction between commodity prices, the real economy, and other financial markets. After an extensive theoretical and practical introduction, the book is divided into four parts: Oil Products – considers the structural changes in the demand and supply for hedging services that are increasingly determining the price of oil Other Commodities – examines markets related to agricultural commodities, including natural gas, wine, soybeans, corn, gold, silver, copper, and other metals Commodity Prices and Financial Markets – investigates the contemporary aspects of the financialization of commodities, including stocks, bonds, futures, currency markets, index products, and exchange traded funds Electricity Markets – supplies an overview of the current and future modelling of electricity markets With contributions from well-known academics and practitioners, this volume includes coverage of the fundamental theory of futures/forwards and derivatives pricing for major commodity markets. The contributions to Sections I and II of this volume, which treat storable or agricultural commodities, take speculation into account through a consideration of markets over time being either in backwardation or contango. Up-to-date considerations of both trading and investment are included in Sections I, II, and III. The book also reviews the effects of urbanization and the expanding middle-class population on commodities.

Financial and Macroeconomic Connectedness

Ronn, E.I., A. Sayrak, and S. Tompaidis (2009), “The Impact of Large Changes in Asset Prices on Intra-Market ... Taylor, S.J. (2007), Asset Price Dynamics, Volatility, and Prediction, Princeton University Press, Princeton, NJ.

Author: Francis X. Diebold

Publisher: Oxford University Press, USA

ISBN: 0199338302

Category: Business & Economics

Page: 265

View: 828

A simple framework is proposed based on variance decompositions from approximating vector autoregressions to define, measure and monitor network connectedness, and these methods are applied in financial and macroeconomic contexts. In financial markets, for example, the interest is in connections among different assets, asset classes, or portfolios, as well as the stocks of individual institutions, and the objects connected are typically returns or return volatilities. Similarly, in macroeconomics the interest is in cross-country real output connections (that is, the global business cycle)

International Finance

Asset Price Dynamics, Volatility, and Prediction. Princeton: Princeton University Press. Tse, Y. K., and Albert K. C. Tsui. 2002. “A Multivariate Generalized Autoregressive Conditional Heteroscedasticity Model with Time-Varying ...

Author: H. Kent Baker

Publisher: Oxford University Press

ISBN: 0199754659

Category: Business & Economics

Page: 676

View: 781

Understanding the current state of affairs and tools available in the study of international finance is increasingly important as few areas in finance can be divorced completely from international issues. International Finance reflects the new diversity of interest in international finance by bringing together a set of chapters that summarizes and synthesizes developments to date in the many and varied areas that are now viewed as having international content. The book attempts to differentiate between what is known, what is believed, and what is still being debated about international finance. The survey nature of this book involves tradeoffs that inevitably had to be made in the process given the vast footprint that constitutes international finance. No single book can cover everything. This book, however, tries to maintain a balance between the micro and macro aspects of international finance. Although each chapter is self-contained, the chapters form a logical whole that follows a logical sequence. The book is organized into five broad categories of interest: (1) exchange rates and risk management, (2) international financial markets and institutions, (3) international investing, (4) international financial management, and (5) special topics. The chapters cover market integration, financial crisis, and the links between financial markets and development in some detail as they relate to these areas. In each instance, the contributors to this book discuss developments in the field to date and explain the importance of each area to finance as a field of study. Consequently, the strategic focus of the book is both broad and narrow, depending on the reader's needs. The entire book provides a broad picture of the current state of international finance, but a reader with more focused interests will find individual chapters illuminating on specific topics.

GARCH Models

Schwert, G.W. (1989) Why does stock market volatility change over time? ... Sharpe, W. (1964) Capital asset prices: a theory of market equilibrium under conditions of risk. ... (2007) Asset Price Dynamics, Volatility and Prediction.

Author: Christian Francq

Publisher: John Wiley & Sons

ISBN: 1119957397

Category: Mathematics

Page: 504

View: 673

This book provides a comprehensive and systematic approach to understanding GARCH time series models and their applications whilst presenting the most advanced results concerning the theory and practical aspects of GARCH. The probability structure of standard GARCH models is studied in detail as well as statistical inference such as identification, estimation and tests. The book also provides coverage of several extensions such as asymmetric and multivariate models and looks at financial applications. Key features: Provides up-to-date coverage of the current research in the probability, statistics and econometric theory of GARCH models. Numerous illustrations and applications to real financial series are provided. Supporting website featuring R codes, Fortran programs and data sets. Presents a large collection of problems and exercises. This authoritative, state-of-the-art reference is ideal for graduate students, researchers and practitioners in business and finance seeking to broaden their skills of understanding of econometric time series models.