Narrow Results

In this research, we propose a practical method for simulating the financial return series whose distribution has a specific heaviness. We employ the Ising model for generating financial return series to be analogous to those of the real series. The similarity between real financial return series and simulated one is statistically verified based on their stylized facts including the power law behavior of tail distribution. We also suggest the scheme for setting the parameters in order to simulate the financial return series with specific tail behavior. The simulation method introduced in this paper is expected to be applied to the other financial products whose price return distribution is fat-tailed.

This paper investigates the volatility spillover and connectedness among the stock markets of G7, BRICS countries, and other countries where COVID-19 is more severe. For this investigation, we perform static and rolling-window analysis to measure volatility spillovers using the spillover index approach and LASSO-VAR for estimating high-dimensional VARs. We also examine the network connectedness at different periods. Our findings indicate that the recent COVID-19 pandemic intensifies volatility spillovers, supporting the financial contagion effects. Furthermore, the United States, Spain, and Russia markets are net volatility transmitters for most of the period before and during the COVID-19 pandemic.

In this chapter, we show how Excel and R language programming can be used to estimate the European call/put prices based on Black–Scholes model as well as binomial option pricing model. Different underlings are considered, including individual stocks, currency, and stock indices. SAS language programming to estimate the European call/put prices based on binomial option pricing model and Black–Scholes option pricing model are given in the appendices.

The main purpose of this chapter is to show how Excel and SAS language can be used to estimate European options and American options. In this chapter, we use bivariate normal distribution to derive American options with one dividend payment. Both Excel program and SAS program are presented in the appendices.