Economics 512: Financial Econometrics |
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Course Description
Eric Zivot Spring 2008 This is a research seminar course in financial econometrics. The focus will be on the statistical modeling of financial time series (asset prices and returns). Topics to be covered include · Distribution and dynamic behavior of asset returns o Non-Gaussian distributions, extreme value theory and copulas o Return predictability o Applications to risk management · Volatility modeling o Autoregressive conditional heteroskedasticity (ARCH) family of models o Stochastic volatility models o Applications to risk management and derivatives pricing · Ultra high frequency time series o Market microstructure models o Realized variance, covariance and bi-power variation o Applications to volatility modeling and market microstructure models · Continuous time models o Simulation and estimation of stochastic differential equations (diffusion models) o Applications to derivatives pricing RequirementsBi-weekly homework assignments and computer lab work using R and S-PLUS. Class presentation on a topic to be assigned with a summary write-up. Take home final exam. PrerequisitesGraduate level econometrics or equivalent (econ 580-583). Familiarity with time series methods at the level of econ 584 or stat 519. Some familiarity with statistical programming using matrix languages (Matlab, R, S-PLUS). TextbooksZivot, E. and Wang, J. (2006). Modeling Financial Time Series with S-PLUS, Second Edition. Springer-Verlag. Tsay, R. (2006). Analysis of Financial Time Series, Second Edition. Wiley. Supplemental reading from journal articles and non-required textbooks (available on course webpage) SoftwareThe course will utilize R and S-PLUS for data analysis and statistical modeling. S-PLUS is a statistical modeling and graphical analysis program sold by Insightful Corporation (a local Seattle company), and is available on many computers throughout the UW campus. The CSSCR lab, on the 6th floor of Condon Hall, has S-PLUS for windows (and the add-on modules) on most of the PCs. S-PLUS for UNIX is also available on some of the campus mainframe computers. Insightful provides a free student version of S-PLUS through e-academy. The University of Washington has an S-PLUS site license package, which allows students to purchase the full version of S-PLUS along with all add-on modules for $115. There is also a discount for purchases of 5-pack bundles ($475 per 5-pack). There are several add-on modules for S-PLUS. We will utilize the S+FinMetrics module for some of the statistical analysis. This module is included with the student version of S-PLUS and in the S-PLUS site license package. It is available on the computers in the CSSCR lab, the Balmer Computer lab, the econ dept computer lab and the MSCC computer lab. The book Modeling Financial Time Series with S-PLUS by Eric Zivot and Jiahui Wang, Springer-Verlag, serves as the User's Guide for S+FinMetrics. |