Modern financial econometrics
|Principal investigator:||Mgr. Jan Šíla MSc.|
Jaroslav Pavlíček M.A.
|Description:||The project takes on the question of relevance of some of the currently used methods in finance. The crisis of 2008 presented the then-industry's reliance on numerical tools, such as Value at Risk, to be questionable.
My research focuses on the drawbacks and possible improvements of the cornerstone of the solution to the portfolio problem. Well-known and commonly used solution, as presented by Markowitz, relies on estimating the variance-covariance matrix by Pearson covariance. Nevertheless, this carries some inherent noise in the estimation, particularly under some conditions. Particle physics theory proposes a remedy by artificially adjusting the eigenvalues of the covariance matrix and thus changing its basis. The hypothesis is whether or not is this method relevant and if it yields better estimations of the true covariance structure of the market.
Second part of the project more practical than theoretical and involves the rising market of cryptocurrencies. Over the past couple of years, this maker is becoming more relevant for investors as well as speculators. Since such markets are very little regulated, the project will inspect the practical aspects of such market in empirical study on high-frequency trading. There is a limited volume of such results because of money-making motivation for the researcher, or selection bias in case of unpromising results. We plan to publish the results either way.
|Work in grant:|
|Finance:||Grant Agency of Charles University - Application No. 1206119|