University of Illinois Urbana-Champaign

Three Essays on Modeling Financial Risk and Pricing Financial Assets

Ju, Xiongwei

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Description

Title
Three Essays on Modeling Financial Risk and Pricing Financial Assets
Author(s)
Ju, Xiongwei
Issue Date
1999
Doctoral Committee Chair(s)
Pearson, Neil D.
Department of Study
Finance
Discipline
Finance
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Commerce-Business
Language
eng
Abstract
Essay three: Nonparametric estimation of multifactor diffusion processes and its applications to Heath-Jarrow-Morton interest rate models . This essay develops a nonparametric estimation framework for multifactor diffusion processes with multivariate diffusion functions and applies it to multifactor Heath-Jarrow-Morton interest rate models. The nonparametrically estimated diffusion functions can help us to choose appropriate parametric functional forms of the diffusion functions and to determine the number of sufficient factors. It is found that a two-factor HJM model is in general sufficient and that the diffusion function for the first factor can not be reduced to a univariate function. The drift function under the risk neutral measure is estimated and compared with that estimated under the real measure, providing an estimate of the risk premium function based on historical data.
Graduation Semester
1999
Type of Resource
text
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http://hdl.handle.net/2142/87448

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