Advanced applied quantitative methods in finance Essay

Advanced applied quantitative methods in finance - strain ExampleFinancial time series have features that ar represented well by models with propellent variances.In this part, we focus at modeling the financial time series of the Italian Stock mart index as well as the Spanish stock market index. We thus intend to poke into the volatility in the Italian Spanish markets by understanding the change in commodity prices all everyplace a period of time. Finally we aim to present the various processes through which financial decisions are interpreted by aid of volatility modeling.Uses regression to provide possible estimates of the disturbance variances at each exemplification point and the original relation is then re-estimated by the weighted least squares procedure that corrects for the heteroskedasticity.The data is a time series data that includes 4255 workaday market index prices for the Italian stock market spanning over the period 12/31/1997-22/01/2014 we also have the Spa nish stock market data that includes 7122 daily market index prices spanning from 1/5/1987 to 4/22/2014The series are characterized by random, rapid changes and are said to be volatile. The volatility seems to change over time as well. There has been upwardly and downward effects in volatility for the Italian market while the time series maculation for Spanish market shows somehow an upward increase with slight variations (decreases) in between the years. The variations in volatility could be as a result among other factors, political factors or the international market changes. The histograms of the empiric distribution of the series are given below.For both the two market indexes, we observe that the series are leptokurtic. That is, they have lots of observations around the average and a relatively large number of observations that are furthest from average for the Italian market index, the centre of the histogram has a high peak and the tails