FRINK Linked Data Fragments server

Matches in SemOpenAlex for { <https://semopenalex.org/work/W96597620> ?p ?o ?g. }

• W96597620 abstract "There is considerable evidence that asset prices are subject to occasional extreme movements. For example, surprise macroeconomic announcements trigger a discontinuous (jump) process in interest rates. Similarly, electricity spot prices display extreme price movements of magnitudes rarely seen in the financial markets. Prom a statistical perspective, this suggests that standard pure-diffusion (non-jump) models are inappropriate for modelling these price series. By construction, the process induced by the Wiener pure-diffusion framework is continuous, yet observed jumps clearly arrive at discrete intervals. The presence of jumps has the potential to adversely impact on model estimation in a number of ways, and this in turn affects the pricing of securities and financial derivatives. Further, the pervasiveness of jumps presents serious challenges to practitioners attempting to measure and manage financial risks. Therefore, a thorough understanding of the prevailing impact of jumps on attempts to model asset prices is crucial. These issues motivate this thesis, which is divided into four separate but related essays. Essay One studies the modelling of short-term interest rates in the presence of jumps. The typical linear mean-reverting drift model is augmented with both time-varying conditional heteroscedasticity (via the LEVELS and GARCH effects) and a Poisson jump factor. Empirical results show that non-jump pure-diffusion models are mis-specified in modelling the short-rate because they imply a spuriously high speed of mean-reversion and high degree of persistence in volatility. However, the model misspecification problems are mitigated via the combined GARCH and jump factors in the proposed jump-diffusion model. While the existence of jumps in interest rates is well documented, their impact on key parameter estimates remains unexplored. In particular, there has been much debate over the 'evidence' of nonlinearity in short-rate drift. This motivates Essay Two to study the impact of jumps on estimates of drift nonlinearity. A very general specification for nonlinear drift is augmented with a jump factor to model various US short-rates. Simulation exercises and empirical findings document that the pervasiveness of jumps induces spurious nonlinearity in the drift estimates of the pure-diffusion models. This apparent nonlinearity diminishes once the jump factor is explicitly introduced via the jump-diffusion model. Essay Three considers modelling electricity spot prices. Energy markets are subject to unique factors that result in price dynamics quite dissimilar to traditional financial assets. This presents a number of challenges when attempting to model electricity spot prices. The extant literature typically adopts jump-diffusion models developed in interest-rate contexts, yet there are strong reasons to believe that these models are inappropriate for electricity price modelling. Essay Three proposes a variation to the existing jump-diffusion framework to model electricity spot prices. It implements a simple pre-estimation filtering procedure to partition the returns into normal and jump regimes. Simulation experiments and empirical results suggest that, compared to the existing jump-diffusion framework, the proposed model is more likely to produce economically plausible parameter estimates, especially for the mean jump size and speed of mean-reversion. Essay Four considers the choice of different models for use in electricity risk management. The unusual nature of electricity markets makes risk management extremely challenging. In particular, the presence of extreme price movements affects the tail of the distribution of electricity price changes. Essay Four develops a semi-parametric model based on Extreme Value Theory (which explicitly models the extreme tails of the return distribution) to forecast Value-at-Risk (VaR) for electricity spot prices. Further, the proposed model accommodates both autoregression in the conditional mean and seasonality and asymmetric effects in the conditional volatility of price changes. Empirical analysis shows that, compared to a number of parametric and nonparametric methods, the proposed semi-parametric model is superior in providing appropriate unconditional and conditional interval coverage in forecasting out-of-sample VaR. Overall, this thesis contributes to the literature by emphasizing the importance of accounting for the presence of jumps in modelling the short-rate and electricity spot prices." @default.
• W96597620 created "2016-06-24" @default.
• W96597620 creator A5025214796 @default.
• W96597620 date "2006-01-01" @default.
• W96597620 modified "2023-09-26" @default.
• W96597620 title "Modelling short-term interest rates and electricity spot prices" @default.
• W96597620 hasPublicationYear "2006" @default.
• W96597620 type Work @default.
• W96597620 sameAs 96597620 @default.
• W96597620 citedByCount "0" @default.
• W96597620 crossrefType "journal-article" @default.
• W96597620 hasAuthorship W96597620A5025214796 @default.
• W96597620 hasConcept C101104100 @default.
• W96597620 hasConcept C10138342 @default.
• W96597620 hasConcept C106159729 @default.
• W96597620 hasConcept C121332964 @default.
• W96597620 hasConcept C135205223 @default.
• W96597620 hasConcept C149782125 @default.
• W96597620 hasConcept C162324750 @default.
• W96597620 hasConcept C175025494 @default.
• W96597620 hasConcept C19244329 @default.
• W96597620 hasConcept C196390999 @default.
• W96597620 hasConcept C23922673 @default.
• W96597620 hasConcept C2776825372 @default.
• W96597620 hasConcept C2779664328 @default.
• W96597620 hasConcept C2780695682 @default.
• W96597620 hasConcept C62520636 @default.
• W96597620 hasConcept C67616677 @default.
• W96597620 hasConcept C91602232 @default.
• W96597620 hasConceptScore W96597620C101104100 @default.
• W96597620 hasConceptScore W96597620C10138342 @default.
• W96597620 hasConceptScore W96597620C106159729 @default.
• W96597620 hasConceptScore W96597620C121332964 @default.
• W96597620 hasConceptScore W96597620C135205223 @default.
• W96597620 hasConceptScore W96597620C149782125 @default.
• W96597620 hasConceptScore W96597620C162324750 @default.
• W96597620 hasConceptScore W96597620C175025494 @default.
• W96597620 hasConceptScore W96597620C19244329 @default.
• W96597620 hasConceptScore W96597620C196390999 @default.
• W96597620 hasConceptScore W96597620C23922673 @default.
• W96597620 hasConceptScore W96597620C2776825372 @default.
• W96597620 hasConceptScore W96597620C2779664328 @default.
• W96597620 hasConceptScore W96597620C2780695682 @default.
• W96597620 hasConceptScore W96597620C62520636 @default.
• W96597620 hasConceptScore W96597620C67616677 @default.
• W96597620 hasConceptScore W96597620C91602232 @default.
• W96597620 hasLocation W965976201 @default.
• W96597620 hasOpenAccess W96597620 @default.
• W96597620 hasPrimaryLocation W965976201 @default.
• W96597620 hasRelatedWork W201270731 @default.
• W96597620 hasRelatedWork W2069899438 @default.
• W96597620 hasRelatedWork W207728769 @default.
• W96597620 hasRelatedWork W2079455416 @default.
• W96597620 hasRelatedWork W2120702528 @default.
• W96597620 hasRelatedWork W2255984365 @default.
• W96597620 hasRelatedWork W2995969705 @default.
• W96597620 hasRelatedWork W2997761467 @default.
• W96597620 hasRelatedWork W3121367736 @default.
• W96597620 hasRelatedWork W3121509336 @default.
• W96597620 hasRelatedWork W3122139852 @default.
• W96597620 hasRelatedWork W3122260931 @default.
• W96597620 hasRelatedWork W3123090743 @default.
• W96597620 hasRelatedWork W3123325310 @default.
• W96597620 hasRelatedWork W3123837184 @default.
• W96597620 hasRelatedWork W3125841401 @default.
• W96597620 hasRelatedWork W3140816720 @default.
• W96597620 hasRelatedWork W4135587 @default.
• W96597620 hasRelatedWork W935760061 @default.
• W96597620 hasRelatedWork W3122882960 @default.
• W96597620 isParatext "false" @default.
• W96597620 isRetracted "false" @default.
• W96597620 magId "96597620" @default.
• W96597620 workType "article" @default.