Asset Market Interconnectedness and Exotic Options: The Mean Impact Surface

Abstract

The project intends to develop models to price financial risk more accurately during periods of financial stress and increasing global interconnectedness. Specifically, it plans to develop a new class of latent factor models with time-varying loadings to model the interconnectedness of global financial markets during periods of financial stress. A key feature of the proposed model is the role of second-order conditional moments of the underlying innovation processes in modelling asset return dynamics. The proposed model is characterised by higher order nonlinear structures which are captured graphically by the mean impact surface. The project also plans to develop a new class of tests to det..

Related publications (2)

Forecasting the volatility of asset returns: The informational gains from option prices

Vance L Martin, Chrismin Tang, Wenying Yao

2021-04-01

A new class of forecasting models is proposed that extends the realized GARCH class of models through the inclusion of option pric..

Joint tests of contagion with applications

R Fry-McKibbin, CYL Hsiao, VL Martin

2019-01-01

Joint tests of contagion are derived which are designed to have power where contagion operates simultaneously through coskewness, ..