nep-ets New Economics Papers
on Econometric Time Series
Issue of 2005‒10‒08
two papers chosen by
Yong Yin
SUNY at Buffalo
  1. Structural Breaks and Common Factors in the Volatility of the Fama-French Factor Portfolios By Andrea Beltratti; Claudio Morana
  2. Wavelet based Multi-grid analysis, Wavelet Galerkin method and their Applications to American option: A Survey By Ken-ichi Mitsui; Yoshio Tabata
  1. By: Andrea Beltratti; Claudio Morana (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: We study the time series properties of the Fama-French factor returns volatility processes. Among the original findings of this paper, we point to structural breaks in the volatility of the factors, and strong coincidence between the timing of the breaks in the volatility of the market portfolio and the timing of the breaks in the volatility of SMB. Moreover, analyses of the break free series show that two common long memory factors drive the long-run evolution of the series. The first factor mainly affects the volatility of the market and the volatility of SMB, while the second one mainly affects the volatility of HML. These results imply that the time-varing volatility of stocks is driven mainly by the time-varying volatility of the market as a whole and of the HML portfolio, while the volatility of SMB does not seem to be an independent driving force.
    Keywords: risk factors, structural change, long memory, fractional cointegration, portfolio allocation
    JEL: C32 F30 G10
    Date: 2005–07
    URL: http://d.repec.org/n?u=RePEc:upo:upopwp:105&r=ets
  2. By: Ken-ichi Mitsui (Graduate School of Economics, Osaka University); Yoshio Tabata (Graduate School of Economics, Osaka University)
    Abstract: This paper surveys the literatures on numerical methods from its origins to present to evaluate American-style claims. An extensive review of numerical meth- ods is provided. In particular, emphases is placed on recent trends and developments in the multi-grid and Galerkin method with the Wavelet basis for American option. Mainly, this paper considers two wavelet based numerical methods. One is that the wavelet basis is used in the restriction and the prolongation in terms of the multi- grid method. The other is the discretization of the components of the Dirichlet problem and the test function in the Galerkin formulation. For the applications of their methods to American option, there are some papers by using the Wavelet Galerkin method with the fixed point iteration method. The multi-grid method without using the Wavelet basis is also used in the American option. It, however, seems that there are not enough studies which are applied to the pricing of Ameri- can options with the wavelet basis.
    Keywords: American option, multi-grid methods, wavelet analysis, multiresolution analysis.
    JEL: C63 G13
    Date: 2005–10
    URL: http://d.repec.org/n?u=RePEc:osk:wpaper:0526&r=ets
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