ETC5460 - Financial econometrics 2

Leader: Associate Professor Gael Martin and Dr Catherine Forbes

Offered

Clayton Second semester 2007 (Day)

Synopsis

This unit introduces students to a range of advanced, current techniques used in analysing financial data. Topics covered include the analysis of the time series and distributional features of financial data; the use of stochastic volatility and realized volatility models to capture time-varying volatility, including long memory in volatility; the use of econometric methods to estimate Value at Risk; the modelling of transactions data using trade duration models and transaction-based volatility models; continuous time processes and the application of econometric techniques to option pricing; and the use of generalized method of moments in financial models.

Objectives

The learning goals associated with this unit are to:

• critically evaluate alternative methods of modelling asset return volatility
• explain the role of volatility modelling in the measurement of risk and in the pricing of financial derivatives
• describe the role of continuous time stochastic processes in the pricing of financial derivatives
• evaluate econometric models for high frequency data
• evaluate the use of generalized method of moments in financial models

Assessment

Written assignments: 40%
Examination (3 hours): 60%

Contact hours

Two 1.5-hour lectures per week for 11 weeks

Prerequisites

ETC3460 or ETC4346 and at least one of ETC3400, ETC3410, ETC3450