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1

I might get down-voted for this, but in my opinion, short-rate models are not very useful for any practical pricing problems in today's finance. Even for simple vanilla rate derivatives (i.e. Caplet or Floorlet), the Libor Market Model framework (just focusing on one particular forward Libor rate) would be more useful and the preferred way to price. Short ...


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Short rate models were first used in the 1970s and 1980s to try to fit and explain the term structure of interest rates - they went beyond simple parametric shapes (polynomials and exponential forms). They were not used for pricing as the fact that these short-rate models (Vasicek, CIR and Ho-Lee) had only two or three free parameters meant that they could ...


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"First of all I am going to check for changes in volatility. What would be a good method to do this" As mentioned in a response to a different question, there are a number of academic papers that use non-parametric tests for determining changes in variance/volatility in financial time series. Whether or not these are "good methods" ...


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With the adoption of the Securities Exchange Act of 1934, being in effect since June 15, 2015, any nationally recognized statistical rating organization (NRSRO) is obliged by the US Securities and Exchange Commission (SEC) to disclose any credit rating action from June 15, 2012 onwards (current rating actions can have a delay of 12-24 months before being ...


3

The way central banks do this is to calculate the Effective Exchange Rate for the country in question. Basically this is a weighted average of the other currencies, with the weights chosen to represent the importance of each foreign country in the international trade of the domestic country. For example for the United States, the Fed has defined the Broad ...


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I have done exactly this sort of thing for my own personal use and have blogged about it on my blog at https://dekalogblog.blogspot.com If you go to the blog and do a search in "search this blog and links" using the term "currency strength" you'll get the relevant posts, which include Octave code, some charts of the individual currencies ...


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Never used the Levene's test, but I also like the regime-switching GARCH approach, as presented in this interesting paper by Sichert (starting from page 7). At least with this approach you won't have to specify the size of your samples.


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I am wondering whether using the Levene's test and breaking up the data like this is a valid method for time series? There are a number of non-parametric tests for changes in variance which might be of interest to you. These have been used (by academics) for financial time series which suggests the 'change in variance' question and splitting the data are ...


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As a first step, I would check whether this time series is autoregressive, that is, of the form $$ y_t = c + \phi_1 y_{t-1} + \ldots + \phi_p y_{t-p} + \varepsilon_t. $$ If this is the only feature of your data, then you should have stationary residuals $\varepsilon$.


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