We propose a new method for pricing options based on GARCH models with filtered historical innovations. In an incomplete market framework, we allow for different distributions of historical and pricing return dynamics enhancing the model flexibility to fit market option prices. An extensive empirical analysis based on S&P 500 index options shows that our model outperforms other competing GARCH ...

Credit risk management is becoming more and more important in recent years. When a company deals with a financial problem, it may not be able to fulfill its financial obligations, which can cause direct and indirect financial losses to shareholders, creditors, investors and other people in the community. Advanced credit risk models that are based on market value include improving credit quality...

In this paper, we introduce a new GARCH model with an infinitely divisible distributed innovation, referred to as the rapidly decreasing tempered stable (RDTS) GARCH model. This model allows the description of some stylized empirical facts observed for stock and index returns, such as volatility clustering, the non-zero skewness and excess kurtosis for the residual distribution. Furthermore, we...

This paper used different copula-based GARCH models (Copula-GARCH model and Copula-GJR-GARCH model) to analyze the dependence structure among gold price, stock price index of gold mining companies and Shanghai Composite Index in China. The empirical results found that the suitable margins were skew-t distribution, and the GJR-GARCH marginal distribution had better explanatory ability than the G...

With the increase of wind power as a renewable energy source in many countries, wind speed forecasting has become more and more important to the planning of wind speed plants, the scheduling of dispatchable generation and tariffs in the day-ahead electricity market, and the operation of power systems. However, the uncertainty of wind speed makes troubles in them. For this reason, a wind speed f...