Sovereign Risk and Contagion Effects in the Eurozone: A Bayesian Stochastic Correlation Model

AbstractThis paper provides the first estimation strategy for the Wishart Affine Stochastic Correlation (WASC) model. We provide elements showing that the use of empirical characteristic function-based estimates is advisable as this function is exponential affine in the WASC case. We use a GMM estimation strategy with a continuum of moment conditions based on the characteristic function. We present the estimation results obtained using a dataset of equity indexes. The WASC model captures most of the known stylized facts associated with financial markets, including leverage and asymmetric correlation effects.

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Estimating the Wishart Affine Stochastic Correlation Model Using the Empirical Characteristic Function

SSRN Electronic Journal ◽

10.2139/ssrn.1054721 ◽

2007 ◽

Cited By ~ 16

Author(s):

José Da Fonseca ◽

Martino Grasselli ◽

Florian Ielpo

Keyword(s):

Characteristic Function ◽

Empirical Characteristic Function ◽

Correlation Model ◽

Stochastic Correlation

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A Unified Stochastic Volatility—Stochastic Correlation Model

Journal of Mathematical Finance ◽

10.4236/jmf.2020.104039 ◽

2020 ◽

Vol 10 (04) ◽

pp. 679-696

Author(s):

Xiang Lu ◽

Gunter Meissner ◽

Hong Sherwin

Keyword(s):

Stochastic Volatility ◽

Correlation Model ◽

Stochastic Correlation

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Stochastic correlation model for speech recognition

Electronics Letters ◽

10.1049/el:19960704 ◽

1996 ◽

Vol 32 (11) ◽

pp. 970 ◽

Cited By ~ 2

Author(s):

J. Ming ◽

F.J. Smith

Keyword(s):

Speech Recognition ◽

Correlation Model ◽

Stochastic Correlation

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QUANTO PRICING IN STOCHASTIC CORRELATION MODELS

International Journal of Theoretical and Applied Finance ◽

10.1142/s0219024918500383 ◽

2018 ◽

Vol 21 (05) ◽

pp. 1850038 ◽

Cited By ~ 1

Author(s):

LONG TENG ◽

MATTHIAS EHRHARDT ◽

MICHAEL GÜNTHER

Keyword(s):

Asset Price ◽

Correlation Model ◽

Uhlenbeck Process ◽

Stochastic Correlation ◽

Correlation Models ◽

The Monte Carlo Method ◽

Ornstein Uhlenbeck Process ◽

Jacobi Process ◽

Correlation Risk ◽

Pricing Formula

Correlation plays an important role in pricing multi-asset options. In this work we incorporate stochastic correlation into pricing quanto options which is one special and important type of multi-asset option. Motivated by the market observations that the correlations between financial quantities behave like a stochastic process, instead of using a constant correlation, we allow the asset price process and the exchange rate process to be stochastically correlated with a parameter which is driven either by an Ornstein–Uhlenbeck process or a bounded Jacobi process. We derive an exact quanto option pricing formula in the stochastic correlation model of the Ornstein–Uhlenbeck process and a highly accurate approximated pricing formula in the stochastic correlation model of the bounded Jacobi process, where correlation risk has been hedged. The comparison between prices using our pricing formula and the Monte-Carlo method are provided.

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Crisis Phones - Suicide Prevention Versus Suggestion/Contagion Effects

Crisis ◽

10.1027/0227-5910/a000313 ◽

2015 ◽

Vol 36 (3) ◽

pp. 220-224 ◽

Cited By ~ 3

Author(s):

Steven Stack

Keyword(s):

Suicide Prevention ◽

Contagion Effects ◽

Long Term Impact

Abstract. Background: There has been no systematic work on the short- or long-term impact of the installation of crisis phones on suicides from bridges. The present study addresses this issue. Method: Data refer to 219 suicides from 1954 through 2013 on the Skyway Bridge in St. Petersburg, Florida. Six crisis phones with signs were installed in July 1999. Results: In the first decade after installation, the phones were used by 27 suicidal persons and credited with preventing 26 or 2.6 suicides a year. However, the net suicide count increased from 48 in the 13 years before installation of phones to 106 the following 13 years or by 4.5 additional suicides/year (t =3.512, p < .001). Conclusion: Although the phones prevented some suicides, there was a net increase after installation. The findings are interpreted with reference to suggestion/contagion effects including the emergence of a controversial bridge suicide blog.

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