Financial Econometrics

2020/2021

Academic Year

ENG

Instruction in English

4

ECTS credits

Delivered at:

Department of Finance

Course type:

Elective course

When:

1 year, 4 module

Course Syllabus

Abstract

The course is designed to introduce the various spectrum of quantitative financial econometrics. It discusses about some of the important contemporary statistical methods and its practical applications in the field of finance. The course starts with the basic concepts like random walk hypothesis and progresses towards the advanced topics like copula and wavelets.

Learning Objectives

• The students will gain substantial knowledge about the financial econometrics and will be able to apply the same in solving real life problems in finance. Successful completion of the course will make them ready for the job market.

Expected Learning Outcomes

• Student knows contemporary methods of econometric research and its appropriate applications.
• Student is able to critically analyze the given problem and to derive comprehensive solutions for the given problem.
• Student identifies problem and need based appropriate model selections.
• New Model development, and its applications to solve the problems in finance.

Course Contents

• Scope and Methodology of Econometrics
• Random Walk Hypothesis
  Random Walk Models
• Geometric Brownian Motion
• Efficient Frontier
• Portfolio Optimisation
• Introduction to Asset Pricing Factor Models
  CAPM Multifactor Asset Pricing Models
• Risk Analysis
  Volatility risk ARCH & GARCH Models Value at Risk Models
• Introduction to Fat tails
  Fat tails in financial data How to handle fat tails It’s implication on investment decision
• Introduction to Copula Models
  Elliptical Copulas Archimedean Copulas
• Introduction to Wavelets
  Multi scale Wavelet decomposition Wavelet Covariance and Correlation Wavelet CoherenceWavelet Clustering
• Project Presentation

Assessment Elements

• In-class participations
• Individual/group project
• Final exam
  Here are the instructions for your upcoming End term exam on Financial Econometrics. Medium: Via LMS Type of Exam: Open Book (Part A) and S/W Execution based (Part B) Total Marks: 55 (Part A: 35 and Part B: 20) Number of Questions: Part A: Seven Questions… Part B: Problem statement & Dataset Allowed: Both online and offline resources…You may refer all available resources Not Allowed: Late Submission; Copy and Paste (Similarly above 15 %) Exam Execution Details: Step 1: Part A: Questions will be uploaded in the LMS and Part B: Dataset will be send to your mail at the end of the day June 11, 2020 around 23:59 PM Step 2: You will have full day to answer the questions(Part A & B) on 12/06/2020 and … deadline for submission of the question answers(Part A & B) will be by the end of the same day in PDF format via LMS : 12/06/2020; 23:59:59 Hours SPB Time.

Interim Assessment

• Interim assessment (4 module)
  0.55 * Final exam + 0.2 * In-class participations + 0.25 * Individual/group project

Bibliography

Recommended Core Bibliography

• Brani Vidakovic, & Peter Mueller. (1991). Wavelets for kids: A tutorial introduction. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.1D880B33
• Eugene F. Fama, & Kenneth R. French. (2004). The Capital Asset Pricing Model: Theory and Evidence. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.D1F2477F
• Eugene F. Fama. (1965). Random Walks in Stock-Market Prices. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.1D3A556E
• FAMA, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance (Wiley-Blackwell), 25(2), 383–417. https://doi.org/10.2307/2325486
• MARKOWITZ, H. (1952). Portfolio Selection. Journal of Finance (Wiley-Blackwell), 7(1), 77–91. https://doi.org/10.2307/2975974
• Markowitz, H. M. (1991). Foundations of Portfolio Theory. Journal of Finance (Wiley-Blackwell), 46(2), 469–477. https://doi.org/10.1111/j.1540-6261.1991.tb02669.x
• Robert F. Engle, & Simone Manganelli. (1999). CAViaR: Conditional Value at Risk By Quantile Regression. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.4F958AC4
• Tsay, R. S. (2010). Analysis of Financial Time Series (Vol. 3rd ed). Hoboken, N.J.: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=334288

Recommended Additional Bibliography

• C. Merton, & Robert C. Merton. (1972). An analytic derivation of the efficient portfolio frontier. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.67631990
• Ross, S. A. (1976). The arbitrage theory of capital asset pricing. Journal of Economic Theory, (3), 341. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.jetheo.v13y1976i3p341.360