Stochastic Filtering with Applications in FinanceThis book provides a comprehensive account of stochastic filtering as a modeling tool in finance and economics. It aims to present this very important tool with a view to making it more popular among researchers in the disciplines of finance and economics. It is not intended to give a complete mathematical treatment of different stochastic filtering approaches, but rather to describe them in simple terms and illustrate their application with real historical data for problems normally encountered in these disciplines. Beyond laying out the steps to be implemented, the steps are demonstrated in the context of different market segments. Although no prior knowledge in this area is required, the reader is expected to have knowledge of probability theory as well as a general mathematical aptitude. Its simple presentation of complex algorithms required to solve modeling problems in increasingly sophisticated financial markets makes this book particularly valuable as a reference for graduate students and researchers interested in the field. Furthermore, it analyses the model estimation results in the context of the market and contrasts these with contemporary research publications. It is also suitable for use as a text for graduate level courses on stochastic modeling. |
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Contents
Stochastic Filtering in Finance | 1 |
2 Foreign Exchange Market Filtering Applications | 20 |
3 Equity Market Filtering Applications | 48 |
4 Filtering Application Inflation and the Macroeconomy | 76 |
5 Interest Rate Model and NonLinear Filtering | 94 |
6 Filtering and Hedging using Interest Rate Futures | 125 |
7 A Multifactor Model of Credit Spreads | 149 |
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Common terms and phrases
analysis approach Baa2 bond price bootstrap CDS spreads chapter coefficient computed convergence correlation covariance credit default swap credit derivatives credit rating credit risk credit spreads distribution dynamic economic empirical equity market explanatory variables factor Figure Financial forward exchange rate framework futures contracts Gaussian implied volatility inflation targeting inflation uncertainty iTraxx Europe Crossover iTraxx Europe Hivol iTraxx indices jump risk Kalman filter kurtosis likelihood function linear market price Markovian system matrix maturity measurement equation observed parameter estimates persistent component premia price of risk regression residuals risk premium sample period short rate short-term interest rate sigma points significant space model specification spot rate standard deviation statistic stochastic differential equation stochastic volatility Table term structure unit root unobserved component variance Vasicek vector volatility function Wiener process yield curve
Bibliographic information
| Title | Stochastic Filtering with Applications in Finance |
| Author | Ramaprasad Bhar |
| Publisher | World Scientific, 2010 |
| ISBN | 9814304859, 9789814304856 |
| Length | 339 pages |
| Subjects | › › Business & Economics / Finance / General Business & Economics / Interest Mathematics / Applied |
| Export Citation | BiBTeX EndNote RefMan |