Generative Learning of Heterogeneous Tail Dependence

We propose a multivariate generative model to capture the complex dependence structure often encountered in business and financial data. Our model features heterogeneous and asymmetric tail dependence between all pairs of individual dimensions while also allowing heterogeneity and asymmetry in the tails of the marginals. A significant merit of our model structure is that it is not prone to error propagation in the parameter estimation process, hence very scalable, as the dimensions of datasets grow large. However, the likelihood methods are infeasible for parameter estimation in our case due to the lack of a closed-form density function. Instead, we devise a novel moment learning algorithm to learn the parameters. To demonstrate the effectiveness of the model and its estimator, we test them on simulated as well as real-world datasets. Results show that this framework gives better finite-sample performance compared to the copula-based benchmarks as well as recent similar models

Untangling hotel industry’s inefficiency: An SFA approach applied to a renowned Portuguese hotel chain

The present paper explores the technical efficiency of four hotels from Teixeira Duarte Group - a renowned Portuguese hotel chain. An efficiency ranking is established from these four hotel units located in Portugal using Stochastic Frontier Analysis. This methodology allows to discriminate between measurement error and systematic inefficiencies in the estimation process enabling to investigate the main inefficiency causes. Several suggestions concerning efficiency improvement are undertaken for each hotel studied.info:eu-repo/semantics/publishedVersio

Volatility forecasting

Volatility has been one of the most active and successful areas of research in time series econometrics and economic forecasting in recent decades. This chapter provides a selective survey of the most important theoretical developments and empirical insights to emerge from this burgeoning literature, with a distinct focus on forecasting applications. Volatility is inherently latent, and Section 1 begins with a brief intuitive account of various key volatility concepts. Section 2 then discusses a series of different economic situations in which volatility plays a crucial role, ranging from the use of volatility forecasts in portfolio allocation to density forecasting in risk management. Sections 3, 4 and 5 present a variety of alternative procedures for univariate volatility modeling and forecasting based on the GARCH, stochastic volatility and realized volatility paradigms, respectively. Section 6 extends the discussion to the multivariate problem of forecasting conditional covariances and correlations, and Section 7 discusses volatility forecast evaluation methods in both univariate and multivariate cases. Section 8 concludes briefly. JEL Klassifikation: C10, C53, G1

Identifying and Predicting Financial Earthquakes Using Hawkes Processes

This dissertation attempts to identify and predict earthquakes in the financial market (financial crashes) using Hawkes processes. Models based on Hawkes processes were first used in the earthquake literature. The dissertation shows Hawkes processes also match investors' self-exciting herding behavior around crashes, which has similar characteristics to the self-exciting behavior of seismic activity around earthquakes. In Chapter 2 an Early Warning System based on Hawkes models is developed that indicates the arrival of a crash within a trading week. EWS based Hawkes model outperform EWS based on well-known and commonly used volatility models, proving that these models do not capture all information that can be used to predict crashes. Specification tests for Hawkes models with a specific focus on testing for cross-excitation, are designed in Chapter 3. Chapter 3 as well as Chapter 4, indicate that shocks in one financial market affect the occurrence (and magnitude) of shocks in other financial markets. Moreover, comparing predictions of models with and without cross-excitation, more accurate predictions are obtained including cross-excitation. The last Chapter (Chapter 5) develops methods to estimate non-affine Hawkes models using the information in option prices with the aid of Machine Learning techniques