Leverage effect on stochastic volatility for option pricing in Hong Kong: A simulation and empirical study

This paper explores the importance of incorporating the financial leverage effect in the stochastic volatility models when pricing options. For the illustrative purpose, we first conduct the simulation experiment by using the Markov Chain Monte Carlo (MCMC) sampling method. We then make an empirical analysis by applying the volatility models to the real return data of the Hang Seng index during the period from January 1, 2013 to December 31, 2017. Our results highlight the accuracy of the stochastic volatility models with leverage in option pricing when leverage is high. In addition, the leverage effect becomes more significant as the maturity of options increases. Moreover, leverage affects the pricing of in-the-money options more than that of at-the-money and out-of-money options. Our study is therefore useful for both asset pricing and portfolio investment in the Hong Kong market where volatility is an inherent nature of the economy.     

The approximation capabilities of the minflex-Laurents,translog, and generalized Leontief forms

This paper compares the approximation capabilities of the minflex-Laurents translog and minflex generalized Leontief cost functions with their translog and generalized Leontief counterparts in Monte Carlo experiments. The minflex Laurent specifications generally provided closer approximations to underlying technical and economic parameters. Imposition of nonlinear restrictions on some of the parameters of the minflex Laurent models yielded measurable improvement in estimated elasticities of substitutions, returns to scale, and rates of technical change.The refereeing process of this paper was handled through E. Appelbaum.     

A comparison of several approximations to the power function of the likelihood ratio test in covariance structure analysis*

In this paper we compare alternative asymptotic approximations to the power of the likelihood ratio test used in covariance structure analysis for testing the fit of a model. Alternative expressions for the noncentrality parameter (ncp) lead to different approximations to the power function. It appears that for alternative covariance matrices close to the null hypothesis, the alternative ncp's lead to similar values, while for alternative covariance matrices far from H_o the different expressions for the ncp can conflict substantively. Monte Carlo evidence shows that the ncp proposed in Satorra and Saris (1985) gives the most accurate power approximations.     

Bayesian MCMC Mapping of Quantitative Trait Loci in a Half-sib Design: a Graphical Model Perspective

Graphical models provide a powerful and flexible approach to the analysis of complex problems in genetics. While task-specific software may be extremely efficient for any particular analysis, it is often difficult to adapt to new computational challenges. By viewing these genetic applications in a more general framework, many problems can be handled by essentially the same software. This is advantageous in an area where fast methodological development is essential. Once a method has been fully developed and tested, problem-specific software may then be required. The aim of this paper is to illustrate the potential use of a graphical model approach to genetic analyses by taking a very simple and well-understood problem by way of example.     

水工钢闸门主梁模糊失效概率计算方法研究

为合理计算水工钢闸门主梁模糊失效概率,分别将主梁相对变形当作一个随机变量及三个变量的组合,采用积分法、当量随机化方法及蒙特卡罗法进行了计算。当相对变形为一个随机量时,采用积分法及当量随机化方法计算,两者的差别在于积分法用隶属函数描述模糊限值,当量随机化方法是将模糊限值当量作为一个随机量。当相对变形看作三个变量的组合时采用蒙特卡罗法进行计算,该方法考虑了三个变量的分布特性,更符合实际情况,模糊限值也用随机量表示。计算表明,积分法与当量随机化方法结果相近,验证了当量随机化方法的精度;蒙特卡罗法结果与相对变形服从正态分布时、用当量随机化方法计算的结果接近,故主梁相对变形服从正态分布更为合理。三种计算方法中,当量随机化方法计算失效概率相较于其它方法有计算过程简便,效率高的优点。     

CEV模型的单位根检验研究

CEV模型（Constant Elasticity of Variance Model）作为常用的利率模型，在实证分析中得到了广泛运用，但是其单位根检验一直被忽略或者被默认可以使用迪基一富勒检验。本文首次运用Box—Cox变换的技巧，针对CEV模型的单位根检验问题，找到了合适的统计量并且证明其渐进分布存在，然后通过蒙特卡罗方法求出了该统计量的分布表。得到了在大样本的情形下可以沿用迪基一富勒检验，但在小样本的情形下与迪基一富勒检验有所偏差的结论。     

SELECTION BIAS CORRECTIONS BASED ON THE MULTINOMIAL LOGIT MODEL: MONTE CARLO COMPARISONS

Abstract.  This survey presents the set of methods available in the literature on selection bias correction, when selection is specified as a multinomial logit model. It contrasts the underlying assumptions made by the different methods and shows results from a set of Monte Carlo experiments. We find that, in many cases, the approach initiated by Dubin and MacFadden (1984) as well as the semi-parametric alternative recently proposed by Dahl (2002) are to be preferred to the most commonly used Lee (1983) method. We also find that a restriction imposed in the original Dubin and MacFadden paper can be waived to achieve more robust estimators. Monte Carlo experiments also show that selection bias correction based on the multinomial logit model can provide fairly good correction for the outcome equation, even when the IIA hypothesis is violated.     

A Bayesian approach for more reliable tail risk forecasts

This paper demonstrates that existing quantile regression models used for jointly forecasting Value-at-Risk (VaR) and expected shortfall (ES) are sensitive to initial conditions. Given the importance of these measures in financial systems, this sensitivity is a critical issue. A new Bayesian quantile regression approach is proposed for estimating joint VaR and ES models. By treating the initial values as unknown parameters, sensitivity issues can be dealt with. Furthermore, new additive-type models are developed for the ES component that are more robust to initial conditions. A novel approach using the open-faced sandwich (OFS) method is proposed which improves uncertainty quantification in risk forecasts. Simulation and empirical results highlight the improvements in risk forecasts ensuing from the proposed methods.     

基于Monte Carlo法的黄土二维微观结构模型构建

从微观尺度研究土的力学行为是揭示其力学机理的一种有效途径,为此首先建立其微观结构模型。目前常通过光学显微镜或者扫描电镜图像获取黄土的微观结构,但将其直接用于二维建模时,存在颗粒悬浮和叠置的问题。基于黄土的颗粒累积分布曲线和实际颗粒形态,提出了一种随机生成其二维微观结构模型的方法。首先将颗粒累积分布曲线按粒径范围分为若干区间,从各区间上随机抽取粒径值,形成满足其粒径分布的粒径数据库;再根据黄土颗粒的微观图像建立颗粒的形态数据库。从这2个数据库中随机抽取颗粒粒径和形态,生成具有随机大小、形态的颗粒库。采用Monte Carlo法将这些颗粒在模型顶端随机投放,建立黄土的二维微观结构模型。该模型为黄土微观力学行为的分析提供了原型。     

Estimation methods for stochastic volatility models: a survey

Abstract.  Although stochastic volatility (SV) models have an intuitive appeal, their empirical application has been limited mainly due to difficulties involved in their estimation. The main problem is that the likelihood function is hard to evaluate. However, recently, several new estimation methods have been introduced and the literature on SV models has grown substantially. In this article, we review this literature. We describe the main estimators of the parameters and the underlying volatilities focusing on their advantages and limitations both from the theoretical and empirical point of view. We complete the survey with an application of the most important procedures to the S&P 500 stock price index.