Financial econometrics is the intersection of statistical techniques and finance with the aim to ascertain how financial prices are determined and to test models that try to replicate how financial markets work. The course will cover the tools of financial econometrics and empirical finance with a moderate degree of sophistication, starting by introducing the extensions to the basic generalized autoregressive conditional heteroskedasticity model (GARCH) in terms of statistical properties, estimated parameters and volatilities. Then, we will discuss models of high-frequency financial data and present non parametric estimators of the integrated volatility. Finally, we present alternative models of the interest rate term structure and use the Kalman filter for the estimation of the unobserved components. In the two last weeks of the course there will be a heavy emphasis on applications.
