Abstract: This study examines conditional Value at Risk by applying the GJR-EVT-Copula model, and finds the optimal portfolio for eight Dow Jones Islamic-conventional pairs. Our methodology consists of modeling the data by a bivariate GJR-GARCH model in which we extract the filtered residuals and then apply the Peak over threshold model (POT) to fit the residual tails in order to model marginal distributions. After that, we use pair-copula to find the optimal portfolio risk dependence structure. Finally, with Monte Carlo simulations, we estimate the Value at Risk (VaR) and the conditional Value at Risk (CVaR). The empirical results show the VaR and CVaR values for an equally weighted portfolio of Dow Jones Islamic-conventional pairs. In sum, we found that the optimal investment focuses on Islamic-conventional US Market index pairs because of high investment proportion; however, all other index pairs have low investment proportion. These results deliver some real repercussions for portfolio managers and policymakers concerning to optimal asset allocations, portfolio risk management and the diversification advantages of these markets.
Abstract: This aims of this paper is to forecast the electricity spot prices. First, we focus on modeling the conditional mean of the series so we adopt a generalized fractional -factor Gegenbauer process (k-factor GARMA). Secondly, the residual from the -factor GARMA model has used as a proxy for the conditional variance; these residuals were predicted using two different approaches. In the first approach, a local linear wavelet neural network model (LLWNN) has developed to predict the conditional variance using the Back Propagation learning algorithms. In the second approach, the Gegenbauer generalized autoregressive conditional heteroscedasticity process (G-GARCH) has adopted, and the parameters of the k-factor GARMA-G-GARCH model has estimated using the wavelet methodology based on the discrete wavelet packet transform (DWPT) approach. The empirical results have shown that the k-factor GARMA-G-GARCH model outperform the hybrid k-factor GARMA-LLWNN model, and find it is more appropriate for forecasts.
Abstract: Acreage response function are modeled taking account of expected harvest prices, weather related variables and other non-price variables allowing for partial adjustment possibility. At the outset, based on the literature on price expectation formation, we explored suitable formulations for estimating the farmer’s expected prices. Assuming that farmers form expectations rationally, the prices of food and biofuel crops are modeled using time-series methods for possible ARCH/GARCH effects to account for volatility. The prices projected on the basis of the models are then inserted to proxy for the expected prices in the acreage response functions. Food crop acreages in different growing states are found sensitive to their prices relative to those of one or more of the biofuel crops considered. The required percentage improvement in food crop yields is worked to offset the acreage loss.
Abstract: Forecasting electricity load plays a crucial role regards
decision making and planning for economical purposes. Besides, in
the light of the recent privatization and deregulation of the power
industry, the forecasting of future electricity load turned out to be a
very challenging problem. Empirical data about electricity load
highlights a clear seasonal behavior (higher load during the winter
season), which is partly due to climatic effects. We also emphasize
the presence of load periodicity at a weekly basis (electricity load is
usually lower on weekends or holidays) and at daily basis (electricity
load is clearly influenced by the hour). Finally, a long-term trend may
depend on the general economic situation (for example, industrial
production affects electricity load). All these features must be
captured by the model.
The purpose of this paper is then to build an hourly electricity load
model. The deterministic component of the model requires non-linear
regression and Fourier series while we will investigate the stochastic
component through econometrical tools.
The calibration of the parameters’ model will be performed by
using data coming from the Italian market in a 6 year period (2007-
2012). Then, we will perform a Monte Carlo simulation in order to
compare the simulated data respect to the real data (both in-sample
and out-of-sample inspection). The reliability of the model will be
deduced thanks to standard tests which highlight a good fitting of the
simulated values.
Abstract: In this talk, we introduce a newly developed quantile
function model that can be used for estimating conditional
distributions of financial returns and for obtaining multi-step ahead
out-of-sample predictive distributions of financial returns. Since we
forecast the whole conditional distributions, any predictive quantity
of interest about the future financial returns can be obtained simply
as a by-product of the method. We also show an application of the
model to the daily closing prices of Dow Jones Industrial Average
(DJIA) series over the period from 2 January 2004 - 8 October 2010.
We obtained the predictive distributions up to 15 days ahead for
the DJIA returns, which were further compared with the actually
observed returns and those predicted from an AR-GARCH model.
The results show that the new model can capture the main features
of financial returns and provide a better fitted model together with
improved mean forecasts compared with conventional methods. We
hope this talk will help audience to see that this new model has the
potential to be very useful in practice.
Abstract: This paper examines the effect of the volatility of oil
prices on food price in South Africa using monthly data covering the
period 2002:01 to 2014:09. Food price is measured by the South
African consumer price index for food while oil price is proxied by
the Brent crude oil. The study employs the GARCH-in-mean VAR
model, which allows the investigation of the effect of a negative and
positive shock in oil price volatility on food price. The model also
allows the oil price uncertainty to be measured as the conditional
standard deviation of a one-step-ahead forecast error of the change in
oil price. The results show that oil price uncertainty has a positive
and significant effect on food price in South Africa. The responses of
food price to a positive and negative oil price shocks is asymmetric.
Abstract: In this paper, we forecast the volatility of Baht/USDs using Markov Regime Switching GARCH (MRS-GARCH) models. These models allow volatility to have different dynamics according to unobserved regime variables. The main purpose of this paper is to find out whether MRS-GARCH models are an improvement on the GARCH type models in terms of modeling and forecasting Baht/USD volatility. The MRS-GARCH is the best performance model for Baht/USD volatility in short term but the GARCH model is best perform for long term.
Abstract: Based on the fact that volatility is time varying in high frequency data and that periods of high volatility tend to cluster, the most successful and popular models in modeling time varying volatility are GARCH type models. When financial returns exhibit sudden jumps that are due to structural breaks, standard GARCH models show high volatility persistence, i.e. integrated behavior of the conditional variance. In such situations models in which the parameters are allowed to change over time are more appropriate. This paper compares different GARCH models in terms of their ability to describe structural changes in returns caused by financial crisis at stock markets of six selected central and east European countries. The empirical analysis demonstrates that Markov regime switching GARCH model resolves the problem of excessive persistence and outperforms uni-regime GARCH models in forecasting volatility when sudden switching occurs in response to financial crisis.
Abstract: The paper evaluates several hundred one-day-ahead
VaR forecasting models in the time period between the years 2004
and 2009 on data from six world stock indices - DJI, GSPC, IXIC,
FTSE, GDAXI and N225. The models model mean using the ARMA
processes with up to two lags and variance with one of GARCH,
EGARCH or TARCH processes with up to two lags. The models are
estimated on the data from the in-sample period and their forecasting
accuracy is evaluated on the out-of-sample data, which are more
volatile. The main aim of the paper is to test whether a model
estimated on data with lower volatility can be used in periods with
higher volatility. The evaluation is based on the conditional coverage
test and is performed on each stock index separately. The primary
result of the paper is that the volatility is best modelled using a
GARCH process and that an ARMA process pattern cannot be found
in analyzed time series.
Abstract: The purpose of this paper is to investigate the
influence of a number of variables on the conditional mean and
conditional variance of credit spread changes. The empirical analysis
in this paper is conducted within the context of bivariate GARCH-in-
Mean models, using the so-called BEKK parameterization. We show
that credit spread changes are determined by interest-rate and equityreturn
variables, which is in line with theory as provided by the
structural models of default. We also identify the credit spread
change volatility as an important determinant of credit spread
changes, and provide evidence on the transmission of volatility
between the variables under study.
Abstract: For best collaboration, Asynchronous tools and particularly the discussion forums are the most used thanks to their flexibility in terms of time. To convey only the messages that belong to a theme of interest of the tutor in order to help him during his tutoring work, use of a tool for classification of these messages is indispensable. For this we have proposed a semantics classification tool of messages of a discussion forum that is based on LSA (Latent Semantic Analysis), which includes a thesaurus to organize the vocabulary. Benefits offered by formal ontology can overcome the insufficiencies that a thesaurus generates during its use and encourage us then to use it in our semantic classifier. In this work we propose the use of some functionalities that a OWL ontology proposes. We then explain how functionalities like “ObjectProperty", "SubClassOf" and “Datatype" property make our classification more intelligent by way of integrating new terms. New terms found are generated based on the first terms introduced by tutor and semantic relations described by OWL formalism.
Abstract: In this study, communities of ammonia-oxidizing
archaea (AOA) and ammonia-oxidizing bacteria (AOB) in nitrifying
activated sludge (NAS) prepared by enriching sludge from a
municipal wastewater treatment plant in three continuous-flow
reactors receiving an inorganic medium containing different
ammonium concentrations of 2, 10, and 30 mM NH4
+-N (NAS2,
NAS10, and NAS30, respectively) were investigated using molecular
analysis. Results suggested that almost all AOA clones from NAS2,
NAS10, and NAS30 fell into the same AOA cluster and AOA
communities in NAS2 and NAS10 were more diverse than those of
NAS30. In contrast to AOA, AOB communities obviously shifted
from the seed sludge to enriched NASs and in each enriched NAS,
communities of AOB varied particularly. The seed sludge contained
members of N. communis cluster and N. oligotropha cluster. After it
was enriched under various ammonium loads, members of N.
communis cluster disappeared from all enriched NASs. AOB with
high affinity to ammonia presented in NAS 2, AOB with low affinity
to ammonia presented in NAS 30, and both types of AOB survived in
NAS 10. These demonstrated that ammonium load significantly
influenced AOB communities, but not AOA communities in enriched
NASs.
Abstract: In this paper usefulness of quasi-Newton iteration
procedure in parameters estimation of the conditional variance
equation within BHHH algorithm is presented. Analytical solution of
maximization of the likelihood function using first and second
derivatives is too complex when the variance is time-varying. The
advantage of BHHH algorithm in comparison to the other
optimization algorithms is that requires no third derivatives with
assured convergence. To simplify optimization procedure BHHH
algorithm uses the approximation of the matrix of second derivatives
according to information identity. However, parameters estimation in
a/symmetric GARCH(1,1) model assuming normal distribution of
returns is not that simple, i.e. it is difficult to solve it analytically.
Maximum of the likelihood function can be founded by iteration
procedure until no further increase can be found. Because the
solutions of the numerical optimization are very sensitive to the
initial values, GARCH(1,1) model starting parameters are defined.
The number of iterations can be reduced using starting values close
to the global maximum. Optimization procedure will be illustrated in
framework of modeling volatility on daily basis of the most liquid
stocks on Croatian capital market: Podravka stocks (food industry),
Petrokemija stocks (fertilizer industry) and Ericsson Nikola Tesla
stocks (information-s-communications industry).
Abstract: This study employs a bivariate asymmetric GARCH
model to reveal the hidden dynamics price changes and volatility
among the emerging markets of Thailand and Malaysian after the
Asian financial crisis from January 2001 to December 2008. Our
results indicated that the equity markets are sharing the common
information (shock) that transmitted among each others. These
empirical findings are used to demonstrate the importance of shock
and volatility dynamic transmissions in the cross-market hedging and
market risk.
Abstract: Little attention has been paid to information
transmission between the portfolios of large stocks and small stocks in the Korean stock market. This study investigates the return and volatility transmission mechanisms between large and small stocks in
the Korea Exchange (KRX). This study also explores whether bad news in the large stock market leads to a volatility of the small stock
market that is larger than the good news volatility of the large stock market. By employing the Granger causality test, we found
unidirectional return transmissions from the large stocks to medium
and small stocks. This evidence indicates that pat information about
the large stocks has a better ability to predict the returns of the medium and small stocks in the Korean stock market. Moreover, by using the
asymmetric GARCH-BEKK model, we observed the unidirectional relationship of asymmetric volatility transmission from large stocks to
the medium and small stocks. This finding suggests that volatility in
the medium and small stocks following a negative shock in the large
stocks is larger than that following a positive shock in the large stocks.
Abstract: This study investigates the relationship between 10
year bond value, Yen/U.S dollar exchange rate, non-farm payrolls (all
employs) and crude oil to U.S. Dow Jones Sustainability Index. A
GARCH model is used to test these relationships for the period
January 1st 1999 to January 31st 2008 using monthly data. Results
show that an increase of the 10 year bond and non farm payrolls (all
employs) lead to an increase of the D.J.S.I returns. On the contrary
the volatility of the Yen/U.S dollar exchange rates as well as the
increase of crude oil returns has negative effects on the U.S D.J.S.I
returns. This study aims at assisting investors to understand the
influences certain macroeconomic indicators have on the companies-
stock returns as reported by the D.J.S.I.
Abstract: This paper aims to present the main instruments used
in the economic literature for measuring the price risk, pointing out
on the advantages brought by the conditional variance in this respect.
The theoretical approach will be exemplified by elaborating an
EGARCH model for the price returns of wheat, both on Romanian
and on international market. To our knowledge, no previous
empirical research, either on price risk measurement for the
Romanian markets or studies that use the ARIMA-EGARCH
methodology, have been conducted. After estimating the
corresponding models, the paper will compare the estimated
conditional variance on the two markets.
Abstract: Unlike this study focused extensively on trading
behavior of option market, those researches were just taken their
attention to model-driven option pricing. For example, Black-Scholes
(B-S) model is one of the most famous option pricing models.
However, the arguments of B-S model are previously mentioned by
some pricing models reviewing. This paper following suggests the
importance of the dynamic character for option pricing, which is also
the reason why using the genetic algorithm (GA). Because of its
natural selection and species evolution, this study proposed a hybrid
model, the Genetic-BS model which combining GA and B-S to
estimate the price more accurate. As for the final experiments, the
result shows that the output estimated price with lower MAE value
than the calculated price by either B-S model or its enhanced one,
Gram-Charlier garch (G-C garch) model. Finally, this work would
conclude that the Genetic-BS pricing model is exactly practical.