Econometrics

Econometrics

Econometrics is the analysis of economics by using mathematical and statistical methods. Econometrics has often been used as a synonym for statistical methods in economics, rather than mathematical economics.

Financial Econometrics is usually defined as the application of statistical techniques to problems in finance. It can be useful for testing theories in finance, determining asset prices or returns, testing hypotheses concerning relationships between variables, examining the effect on financial markets of changes in economic conditions, forecasting future values of financial variables and for financial decision-making.

Financial risk management concerns the theories and methods that firms use to handle the risks they are facing. From a statistical and econometric perspective risk management involves topics such as volatility modeling, correlation modeling, extreme value problems, simulation based methods, modeling of option risk.

Topics of recent and current interest include:

  • Time series analysis of prices and returns from financial markets and commodities markets.
  • Energy and weather derivatives.
  • Asset pricing in continuous time: Stochastic differential equations.
  • Quantitative Finance: Derivatives modeling and stochastic volatility.
  • Financial risk management.