New approaches for testing in nonlinear models. The outcome of this project is a new econometric methodology that will be particularly useful for developing our understanding of Australian (and global) financial markets. Specific benefits are that (i) our value-at-risk models will enhance national and international awareness of issues relating to financial risk management; (ii) our exchange rate pass through model will aid the development of Australian trade and pricing policies and (iii) our du ....New approaches for testing in nonlinear models. The outcome of this project is a new econometric methodology that will be particularly useful for developing our understanding of Australian (and global) financial markets. Specific benefits are that (i) our value-at-risk models will enhance national and international awareness of issues relating to financial risk management; (ii) our exchange rate pass through model will aid the development of Australian trade and pricing policies and (iii) our duration models for trade in Australian stocks will lead to a better understanding of the microstructure of the Australian stock market.Read moreRead less
Understanding and Modelling Weather Derivatives in Australia for the Purpose of their Accurate Pricing: a Statistical and Econometric Investigation. Australia suffers some of the most adverse and extreme weather globally. Its government and industries, especially agriculture and electricity, stand to benefit from improved understanding of weather derivatives and capability to price them accurately. Tailored to Australian weather scenarios, weather derivatives will be tools to manage local risk f ....Understanding and Modelling Weather Derivatives in Australia for the Purpose of their Accurate Pricing: a Statistical and Econometric Investigation. Australia suffers some of the most adverse and extreme weather globally. Its government and industries, especially agriculture and electricity, stand to benefit from improved understanding of weather derivatives and capability to price them accurately. Tailored to Australian weather scenarios, weather derivatives will be tools to manage local risk factors, and increase global competitiveness by hedging against competitors' good weather-related advantage. The US weather derivative market, capitalised at over US$7.5b, began just 7 years ago; there is no organised Australian market. This project's smart techniques for improving pricing accuracy will support the development and vigorous growth of a local market.Read moreRead less
Entropic Analysis of Financial Risk and Uncertainty. The recent financial crisis has shown that the financial markets are not as stable as expected, and are at risk from a lack of knowledge about new financial products and their risks. This research provides a framework to better measure and forecast financial risks by applying a set of techniques known collectively as entropic analysis as a novel way to measure the amount of information that can be extracted from historical data. The research w ....Entropic Analysis of Financial Risk and Uncertainty. The recent financial crisis has shown that the financial markets are not as stable as expected, and are at risk from a lack of knowledge about new financial products and their risks. This research provides a framework to better measure and forecast financial risks by applying a set of techniques known collectively as entropic analysis as a novel way to measure the amount of information that can be extracted from historical data. The research will facilitate the design of policies and regulations by regulatory authorities that need to evaluate new financial products, their associated risks and their impacts on the financial markets.Read moreRead less
Bayesian Inference for Flexible Parametric Multivariate Econometric Modelling. The anticipated outcomes include the development of enhanced multivariate econometric models and innovative computationally intensive methods for their estimation. These models are used in numerous and diverse applications which are data-intensive and where more complete models will greatly enhance data-based decision-making. Results include improved information use in the wholesale electricity markets, in financial m ....Bayesian Inference for Flexible Parametric Multivariate Econometric Modelling. The anticipated outcomes include the development of enhanced multivariate econometric models and innovative computationally intensive methods for their estimation. These models are used in numerous and diverse applications which are data-intensive and where more complete models will greatly enhance data-based decision-making. Results include improved information use in the wholesale electricity markets, in financial market investment decision-making and for the assessment of the impact of internet advertising.Read moreRead less
Modelling a portfolio of financial assets: structure, estimation, testing and forecasting. Information regarding financial returns and risk is essential for optimal portfolio selection and asset management. Returns and risk have typically been analysed for individual assets. The project provides a theoretical solution to the important practical problem of modelling a portfolio of financial assets in realistic situations. The significance of the research is the development of a new approach to an ....Modelling a portfolio of financial assets: structure, estimation, testing and forecasting. Information regarding financial returns and risk is essential for optimal portfolio selection and asset management. Returns and risk have typically been analysed for individual assets. The project provides a theoretical solution to the important practical problem of modelling a portfolio of financial assets in realistic situations. The significance of the research is the development of a new approach to analyse a portfolio of returns and risk, and the determination of its applicability using numerical simulation techniques. The expected outcomes are an optimal practical method for analysing a portfolio of assets, a scientific monograph, and publications in leading international journals.Read moreRead less
Trending time series models with non- and semi-parametric methods. The outcomes of this project will not only complement but also enhance the existing strengths and reputation of Australian researchers in the field of econometrics. The outcomes are also expected to help improve model building and forecasting from better models in climatology, economics, environmetrics and financial econometrics.
The US Interest Rate Conundrum and its Implications for Australia. The project generalises existing factor models of interest rates. The project will result in several benefits nationally as well as internationally. As U.S. interest rates and U.S. monetary policy in general are important determinants of interest rates in Australia, the project will lead to an improved understanding of the international mechanism linking interest rates. This will also provide a better framework in which to unders ....The US Interest Rate Conundrum and its Implications for Australia. The project generalises existing factor models of interest rates. The project will result in several benefits nationally as well as internationally. As U.S. interest rates and U.S. monetary policy in general are important determinants of interest rates in Australia, the project will lead to an improved understanding of the international mechanism linking interest rates. This will also provide a better framework in which to understand and monitor monetary policy in Australia. An important aspect of the project is the development of new testing procedures that improve upon existing nonparametric methods.Read moreRead less
The predictive, behavioural and economic forecasting performance of alternative credit risk and bankruptcy models: a global study. This study empirically evaluates a range of "new age" credit risk models using a large global sample of failed firms and bond ratings data. The study will provide a substantive body of empirical evidence to assist regulators, creditors, investors and other users assess the merits, strengths and limitations of alternative risk modelling approaches.
How do company announcements affect trading frequency in stocks? This project addresses the question of how financial markets respond to news by investigating how company announcements affect trading patterns in Australian banking stocks. Analysis will be based on new extensions to autoregressive conditional hazard (ACH) models, with research focussing on how to incorporate announcement variables into an ACH framework and how to modify standard ACH analysis to account for simultaneous transactio ....How do company announcements affect trading frequency in stocks? This project addresses the question of how financial markets respond to news by investigating how company announcements affect trading patterns in Australian banking stocks. Analysis will be based on new extensions to autoregressive conditional hazard (ACH) models, with research focussing on how to incorporate announcement variables into an ACH framework and how to modify standard ACH analysis to account for simultaneous transactions, market frictions and spillover effects. The results of this research will assist government and companies in choosing announcement times, aid traders in portfolio adjustment and will lead to a better understanding of the microstructure of Australian stock markets.Read moreRead less
New Statistical Procedures for Analysing Dependence in Non-Gaussian Time Series Data. In the economic, finance and business spheres, statistical data is often discrete, binary, strictly positive, or characterized by an uneven distribution of values above and below the average. Prominent examples are the high frequency financial data that have become accessible with the computerization of financial markets, including the number of trades in successive time intervals, the direction of price change ....New Statistical Procedures for Analysing Dependence in Non-Gaussian Time Series Data. In the economic, finance and business spheres, statistical data is often discrete, binary, strictly positive, or characterized by an uneven distribution of values above and below the average. Prominent examples are the high frequency financial data that have become accessible with the computerization of financial markets, including the number of trades in successive time intervals, the direction of price changes, the time between trades and the return on a financial asset over short periods. This project develops a range of new statistical tools that will enable both researchers and practitioners to analyze the dynamic behaviour in such data and thereby validate and implement a range of financial models.Read moreRead less