This paper presents empirical evidence of long range dependence in returns and volatility for banking indices for 41 different countries. We employ the Rescaled Hurst analysis and develop a formal statistical procedure to test for long range dependence. This procedure allows to rank these countries by relative inefficiency, which can provide guidance for investors and portfolio managers. Keywor...

The aim of this paper is to study stochastic volatility models and their calibration to real market data. This task is formulated as the optimization problem and several optimization techniques are compared and used in order to minimize the difference between the observed market prices and the model prices. At first we demonstrate the complexity of the calibration process on the popular Heston ...

This paper proposes structured parametrizations for multivariate volatility models, which use spatial weight matrices induced by economic proximity. These structured speci…cations aim at solving the curse of dimensionality problem, which limits feasibility of model-estimation to small cross-sections for unstructured models. Structured parametrizations possess the following four desirable proper...

A remarkable feature of the crude oil market is a dramatic rise in oil price volatility over time which has been accompanied by a substantial fall in oil production volatility. We investigate the sources of this opposite evolution of both oil market variables. Our main …nding is that the observed volatility puzzle can be rationalized by the fact that the price elasticities of both oil supply an...

Volatility is the primary measure of risk in modern finance and volatility estimation and inference has attracted substantial attention in the recent financial econometric literature, especially in high-frequency analyses. High-frequency prices carry a significant amount of noise. Therefore, there are two volatility components embedded in the returns constructed using high frequency prices: the...

this paper investigates the nature of volatility characteristics of stock returns in the bangladesh stock markets employing daily all share price index return data of dhaka stock exchange (dse) and chittagong stock exchange (cse) from 02 january 1993 to 27 january 2013 and 01 january 2004 to 20 august 2015 respectively.  furthermore, the study explores the adequate volatility model for the stoc...

In this paper, we discuss the paradigm shift in bank capital from the “gone concern” to the “going concern” mindset. We then propose a methodology for pricing a product of this shift called Contingent Capital Notes (“CoCos”). The Merton Model can determine a price for credit risk by using the firm’s equity value as a call option on those assets. Our pricing methodology for CoCos also uses the c...