CS代考 EC310L Financial Econometrics 2021/2022

EC310L Financial Econometrics 2021/2022
Final Exam 2021/2022 (Due on Dec 18 at 11:59 pm.)
· Answer all Questions
· Submit both the MSWord Document and the do file to MyLS

PART (A) Data Analysis

In Part (A), You will construct different portfolio return series and evaluate the portfolio based on Value-at-Risk tests. Download the data assigned to you from MyLS. The data set consists of three stock price series from 2000M2 to 2021M12. The variables are all adjusted closing prices.

1. (10 marks) First, Generate the log return Rt = ln(Pt/Pt-1) for all three series and then report the descriptive statistics and correlation from Stata. Use the “sum” command to obtain the statistics and then fill out the following table: Rp = return of an equally weighted portfolio; Rmv = return of minimum variance portfolio

Variable Name
Mean
Variance
Stand. Deviation

Rmv

Variance-Covariance
R1
R2
R3
RP
Rmv

Rmv

Which series has the lowest risk among the five series? Is it possible that one of the stock return series has a lower risk than the Rmv?

2. (5 marks) Report the one-day 1% and 5% VaR using the historical variances
and

Correlation
1% VaR
5% VaR
Expected Shortfall (ES) 1%

Rmv

3. (5 marks) Plot the RiskMetrics 1% and 5% VaR using RiskMetrics exponential smoothing variance with the smoothing parameter set to 0.9.

Is the RiskMetrics approach superior to the historical variance approach?

What is the dollar loss of a 10 million dollar equally weighted portfolio such that it will only be exceeded 1% of the time in the next month for 2021m12?

4. (5 marks) Graph exceedance for the 1% VaR. of RP and Rmv. . Is the minimum variance portfolio superior to the equally weighted portfolio in terms of exceedance?

5. (3 marks) Construct the hit sequence of the two portfolios (RP and Rmv) and report the summary statistics. Are they consistent with the theoretical value?

6. (5 marks) Perform an unconditional VaR test for the two portfolios at a 5% level of significance

7. (5 marks) Perform the conditional VaR test assuming return clustering (first-order Markov chain) for the two portfolios at a 5% level of significance

8. (3 marks) Is the VaR model suitable for the minimum variance portfolio? How would you improve this risk model?

9. (3 marks) Estimate a GARCH(1,1) model using the minimum variance portfolio and report the results. You have to first select the lag length for the mean equation.

10. (6 marks) Perform an unconditional 1%VaR test using the GARCH variance at a 5% level of significance

H0: H1:

Df = Level of significance =

Test statistic = Critical Value =

Conclusion

Is the GARCH Model producing a better VaR measure for the minimum variance portfolio? Why or Why not?

PART (B) Paper Critique (30 marks)

For this part of the exam, you are required to write a critique for a research paper attached below. The paper examines the dynamic economic relationships between the fundamental variables that influence natural gas prices within the U.S. market. They use a structural vector autoregressive (VAR) model to investigate the main drivers of natural gas prices. I would like you to express your opinion on the quality of the research paper. (Ignore pages 16-17 and any reference related to the Markov Switching Model)

The written assessment report should outline the strengths and weaknesses of the paper in terms of the research question, methodology, implementation, and conclusion.

1. Is the research question clearly explained and motivated, carried through the paper to end.

2. Critically shows how key results shed light on the question. Show limitations of the analysis.

3. Are the models and diagnostic statistics su_cient to answer the research question?

** Be more than a statement of errata and questions you would pose to the
authors.

Maximum Length (3 pages single-spaced)

Related Posts