Calibration of factor models with equity data: parade of correlations
AbstractThis paper describes the process of ML-estimating of the equity correlations which can be used as proxies for asset correlations. In a Gaussian framework the ML-estimators are given in closed form. On this basis the impact of the Lehman’s collapse on the dynamics of correlations is investigated: after the Lehman failure in September 2008 the rise in correlations took place across all economic sectors.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36300.
Date of creation: 30 Jan 2012
Date of revision:
intra/inter asset correlations; maximum likelihood estimation; single risk factor model; normal mixture; VAR of equity portfolio;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
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- Timo Altmann & Thorsten Schmidt & Winfried Stute, 2008. "A Shot Noise Model For Financial Assets," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 87-106.
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