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1
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0answers
46 views

How to write time-varying functions in R? Applied example

Let's say I want to use a Gaussian copula $$C_{R_t}(\eta_1, ..., \eta_n) = N_{R_t}(N^{-1}(\eta_1), ...,N^{-1}(\eta_n))$$ with a time-varying correlation matrix $R_t$. Through DCC we model the ...
21
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3answers
2k views

Tools in R for estimating time-varying copulas?

Are there libraries in R for estimating time-varying joint distributions via copulas? Hedibert Lopes has an excellent paper on the topic here. I know there is an existing packaged called copula but ...
6
votes
0answers
97 views

Transition densities in the Heson model

Knowing the Characteristic function $\Phi_{T,t} = \mathbb{E} [ e^{i u S_T} | S_t, V_t]$ (or equivalently, the Laplace transform) of an affine process, it's possible to know the distribution of the ...
2
votes
1answer
131 views

Where does this copula come from?

In a paper I encountered the following notation $$P(Z\leq z,u\leq Y\leq v)=C(F_{Z}(z),F_{Y}(v)-F_{Y}(u))$$ However I don't see why this holds in relation to uniform random variables. Usually $$P(Z\...
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votes
4answers
1k views

How do I estimate the joint probability of stock B moving, if stock A moves?

I have two stocks, A and B, that are correlated in some way. If I know (hypothetically) that stock A has a 60% chance of rising tomorrow, and I know the joint probability between stocks A and B, how ...
8
votes
1answer
362 views

Simulating the joint dynamics of a stock and an option

I want to know the joint dynamics of a stock and it's option for a finite number of moments between now and $T$ the expiration date of the option for a number of possible paths. Let $r_{\mathrm{s}}$ ...