Quantitative Analysis of Finance II

The subject will focus on estimating and testing nonlinear models in finance including volatility models, artificial neural networks, factor models of contagion and discrete models of financial behaviour. Special attention will be given to estimating and testing dynamic latent factor models using Principal Components and Kalman filters, modelling risk neutral dynamics in option markets, and fat-tailed behaviour in asset returns using extreme value theory and copulas. Estimation and testing methods are based on maximum likelihood methods. The R, RStudio and Excel computer programs will be used throughout the course. This subject also provides students with the experience of carrying out a research-based project on a specific topic in applied econometrics.