# Financial Statistics

### Courseprogramme

The preliminary course programme for fall 2018 can now be found here: Courseprogramme

### Lectures

Note that there is often links to papers in the slides!

### Exercises

• Exercise 5: 14.1, 14.2
• Exercise 4: Solve assignments 13.1, 13.2, 13.3
• Exercise 3: Solve assignments 5.6, 7.3, 8.2, 8.5, 8.6 and 8.7, (and if you have time 7.1, 8.9)
• Exercise 2: Solve assignments 5.5, 5.4 (and if you have time 5.6)
• Exercise 1: Solve assignments 4.5, and 4.1 (if you have time).

### Computer exercises

MLmax help: You can find a demo file and demo log-likelihood function.
• Computer Exercise 4 can be found here: Financial Statistics lab 4 Data files needed are
• Computer Exercise 3 can be found here: Financial Statistics lab 3. See also Conditional CIR moments Data files needed are
• Computer Exercise 2 can be found here: Financial Statistics lab 2. Data files needed are You may also want to use extra the Matlab routines ccc_mvgarch.p and ccc_mvgarch.m
• Computer exercise 1 can be found here: Financial Statistics lab 1 You need some additional files: Sign up for the computer exercise via SAM
• ### Course Coordinator/Lecturer

Magnus Wiktorsson, tel 046-222 86 25, MH:130.

### General information

University credits: 7.5 Grading scale: TH Level: A
Language of Instruction: The Course will be given in English

Lectures: (typically!) Tuesday 10.15-12.00 E:B, Thursday 10:15-12:00 E:C
Exercise: Monday 8:15-12.00 MH:227
Computer exercises: Thurday 13-17 or Friday 8-12

### Aim

The course should be regarded as the statistical part of a course package also including EXTQ35 Financial Valuation and Risk Management and FMSN25 Valuation of Derivative Assets. Its purpose is to give the student tools for constructing models for risk valuation and pricing, based on data.

### Knowledge and Understanding

For a passing grade the student must:
• handle variance models such as the GARCH family, stochastic volatility, and models use for high-frequency data,
• use basic tool from stochastic calculus: Ito's formula, Girsanov transformation, martingales, Markov processes, filtering,
• use tools for filtering of latent processes, such as Kalman filters and particle filters,
• statistically validate models from some of the above model families.

### Skills and Abilities

For a passing grade the student must:
• be able to find suitable stochastic models for financial data,
• work with stochastic calculus for pricing of financial contracts and for transforming models so that data becomes suitable for stochastic modelling,
• understand when and how filtering methods should be applied,
• validate a chosen model in relative and absolute terms,
• solve all parts of a modelling problem using economic and statistical theory (from this course and from other courses) where the solution includes model specification, inference, and model choice,
• present the solution in a written technical report, as well as orally,
• utilise scientific articles within the field and related fields.

### Contents

The course deals with model building and estimation in non-linear dynamic stochastic models for financial systems. The models can have continuous or discrete time and the model building concerns determining the model structure as well as estimating possible parameters. Common model classes are, e.g., GARCH models with discrete time or models based on stochastic differential equations in continuous time. The course participants will also meet statistical methods, such as Maximum-likelihood and (generalised) moment methods for parameter estimation, kernel estimation techniques, non-linear filters for filtering and prediction, and particle filter methods. The course also discusses prediction, optimisation, and risk evaluation for systems based on such descriptions.

### Formal required Qualifications

FMSF10/MASC04 Stationary stochastic processes or corresponding courses.

### Assume Qualifications

Preferably also one or several of FMSN45/MASM17 Time series analysis, EXTQ35 Financial Valuation and Risk Management , and FMSN25MASM24 Valuation of Derivative Assets.

### Literature

Lindstrom, E., Madsen, H and Nielsen, J. N. (2015) , Statistics for Finance CRC Press/Chapman Hall
Errata errata can be found here

### Assessment

Written report and oral presentation of a larger project and compulsory computer exercises. The course grade is based on the project grade.

Questions:Magnus Wiktorssonm Top of page
Last modified: Tue December 11 17:32:12 CET 2018 Validate: HTML CSS

## Course Start

Introductory Meeting:
2018-11-05, 10:15
MH:Riesz

Approximate start date:
Nov, 5, 2018