Financial Time Series
19
Financial Time Series CS3
description
Financial Time Series. CS3. Financial Time Series. Outline. Discrete Time Series Analysis Continuous Time Series Analysis. Discrete Time Series Analysis. Comes from the same distribution. Auto-regressive model. ~. Moving Average Model. MA(1). Weighted Average of Shocks. Why?. ARMA. - PowerPoint PPT Presentation
Transcript of Financial Time Series
Financial Time Series
CS3
Financial Time Series
Outline
• Discrete Time Series Analysis• Continuous Time Series Analysis
Discrete Time Series Analysis
Comes from the same distribution
Auto-regressive model
~
Moving Average Model
Weighted Average of Shocks
Why?
MA(1)
ARMA
• Combination of AR and MA
Learning the Parameters
• Easy !!! just apply normal regression analysis techniques
• However, there are sophisticated method like Partial Auto-correlation (PACF).
Non-stationary/
Diverge
US GDP
A Simple Technique to convert to Stationary
Model c as ARMA(p,q)
Heteroscedasticity
Robert Engle
Continuous Time Series Analysis
Why?
• Interest rate• Prices for options, shares and bonds changes
continuously
Modeling Continuous Time Series
W0 = 0Wt is almost surely continuous
Continuous Time Series with Jump
Simple Levy Process
/
An example to estimate parameters
is interest rate
