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Parametric Restrictions (parametric + restriction)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Empirical Likelihood-Based Inference in Conditional Moment Restriction Models

ECONOMETRICA, Issue 6 2004
Yuichi Kitamura
This paper proposes an asymptotically efficient method for estimating models with conditional moment restrictions. Our estimator generalizes the maximum empirical likelihood estimator (MELE) of Qin and Lawless (1994). Using a kernel smoothing method, we efficiently incorporate the information implied by the conditional moment restrictions into our empirical likelihood-based procedure. This yields a one-step estimator which avoids estimating optimal instruments. Our likelihood ratio-type statistic for parametric restrictions does not require the estimation of variance, and achieves asymptotic pivotalness implicitly. The estimation and testing procedures we propose are normalization invariant. Simulation results suggest that our new estimator works remarkably well in finite samples. [source]

AN EQUILIBRIUM GUIDE TO DESIGNING AFFINE PRICING MODELS

MATHEMATICAL FINANCE, Issue 4 2008
Bjørn Eraker
The paper examines equilibrium models based on Epstein,Zin preferences in a framework in which exogenous state variables follow affine jump diffusion processes. A main insight is that the equilibrium asset prices can be computed using a standard machinery of affine asset pricing theory by imposing parametric restrictions on market prices of risk, determined inside the model by preference and model parameters. An appealing characteristic of the general equilibrium setup is that the state variables have an intuitive and testable interpretation as driving the consumption and dividend dynamics. We present a detailed example where large shocks (jumps) in consumption volatility translate into negative jumps in equilibrium prices of the assets as agents demand a higher premium to compensate for higher risks. This endogenous "leverage effect," which is purely an equilibrium outcome in the economy, leads to significant premiums for out-of-the-money put options. Our model is thus able to produce an equilibrium "volatility smirk," which realistically mimics that observed for index options. [source]

Blockwise generalized empirical likelihood inference for non-linear dynamic moment conditions models

THE ECONOMETRICS JOURNAL, Issue 2 2009
Francesco Bravo
Summary, This paper shows how the blockwise generalized empirical likelihood method can be used to obtain valid asymptotic inference in non-linear dynamic moment conditions models for possibly non-stationary weakly dependent stochastic processes. The results of this paper can be used to construct test statistics for overidentifying moment restrictions, for additional moments, and for parametric restrictions expressed in mixed implicit and constraint form. Monte Carlo simulations seem to suggest that some of the proposed test statistics have competitive finite sample properties. [source]

Do volatility determinants vary across futures contracts?

THE JOURNAL OF FUTURES MARKETS, Issue 3 2010
Insights from a smoothed Bayesian estimator
We apply a new Bayesian approach to multiple-contract futures data. It allows the volatility of futures prices to depend upon physical inventories and the contract's time to delivery,and it allows those parametric effects to vary over time. We investigate price movements for lumber contracts over a 13-year period and find a time-varying negative relationship between lumber inventories and lumber futures price volatility. The Bayesian approach leads to different conclusions regarding the size of the inventory effect than does the standard method of parametric restrictions across contracts. The inventory effect is smaller for the most recent contracts when the inventory levels are larger. In contrast, the Bayesian approach does not lead to substantively different conclusions about the time-to-delivery effect than do traditional classical methods. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:257,277, 2010 [source]