A Bayesian State Space Methodology for Forecasting Stock Market Volatility and Associated Time-varying Risk Premia

Project: Research

Project Description

This project will produce a suite of new statistical methods for forecasting stock market volatility and the aversion of traders to volatility risk, using information from the spot and option markets. Focus will be given to the production of probabilistic forecasts for the financial variables of interest. Such forecasts will enable the likelihood of extreme volatility, and/or extreme risk aversion, to be quantified, on the basis of current market data - clearly an exercise of paramount importance in the present financial environment. State-of-the-art statistical methods will be used to produce real-time estimates of the probability of extreme movements in asset prices, as new market data becomes available each trading day.
StatusFinished
Effective start/end date1/01/1031/12/13

Funding

  • Australian Research Council (ARC): AUD691,200.00
  • Australian Research Council (ARC): AUD143,000.00