After this course, the student will know how to measure the volatility of a financial asset. Furthermore, he will know how how to use the volatility to construct prediction intervals for the return of an asset taking into account whether the market has a high or low volatility in the moment when the prediction is made. For this purpose, GARCH and Stochastic Volatility models will be studied.
The student will also learn how to obtain correlations between financial assets that possibly are time-varying. Measuring these correlations are cruzial for portfolio formation models. The estimation of the correlations will be carried out through the implementation of multivaritate GARCH models. Furthermore, different econometric models will be implemented to test for different financial theories as, for example, testing for market efficiency or for estimating the Value at Risk of a given asset.
Transversals: Interpretation of financial data. Using software designed for financial data analysis.