In this thesis, an attempt is made to build on the quantitative research in the field of Islamic Finance. Firstly, univariate modelling using special GARCH-type models is performed on both the FTSE All World and FTSE Shari'ah All World indices. The AR(1) + APARCH(1,1) model with standardized skewed student-t innovations provided the best overall fit and was the most successful at VaR modelling for long and short trading positions. A risk assessment is done using the Conditional Tail Expectation (CTE) risk measure which concluded that in short trading positions the FTSE Shari'ah All World index was riskier than the FTSE All World index but, in long trading positions the results were not conclusive as to which is riskier. Secondly, under the Markowitz model of risk and return the performance of Islamic equity is compared to conventional equity using various Dow Jones indices. The results indicated that even though the Islamic portfolio is relatively less diversified than the conventional portfolio, due to several investment restrictions, the Shari'ah screening process excluded various industries whose absence resulted in risk reduction. As a result, the Islamic portfolio provided a basket of stocks with special and favourable risk characteristics. Lastly, copulas are used to model the dependency structure between the filtered returns of the FTSE All World and FTSE Shari'ah All World indices after fitting the AR(1) + APARCH(1,1) model with standardized skewed student-t innovations. The t copula outperformed the others and a demonstration of forecasting using the copula-extended model is done.

In this thesis, an attempt is made to build on the quantitative research in the field of Islamic Finance. Firstly, univariate modelling using special GARCH-type models is performed on both the FTSE All World and FTSE Shari'ah All World indices. The AR(1) + APARCH(1,1) model with standardized skewed student-t innovations provided the best overall fit and was the most successful at VaR modelling for long and short trading positions. A risk assessment is done using the Conditional Tail Expectation (CTE) risk measure which concluded that in short trading positions the FTSE Shari'ah All World index was riskier than the FTSE All World index but, in long trading positions the results were not conclusive as to which is riskier. Secondly, under the Markowitz model of risk and return the performance of Islamic equity is compared to conventional equity using various Dow Jones indices. The results indicated that even though the Islamic portfolio is relatively less diversified than the conventional portfolio, due to several investment restrictions, the Shari'ah screening process excluded various industries whose absence resulted in risk reduction. As a result, the Islamic portfolio provided a basket of stocks with special and favourable risk characteristics. Lastly, copulas are used to model the dependency structure between the filtered returns of the FTSE All World and FTSE Shari'ah All World indices after fitting the AR(1) + APARCH(1,1) model with standardized skewed student-t innovations. The t copula outperformed the others and a demonstration of forecasting using the copula-extended model is done.

Made available in DSpace on 2016-06-02T20:06:07Z (GMT). No. of bitstreams: 1 5123.pdf: 958057 bytes, checksum: 23f5ad95404afd58fe48eeb517ef5b41 (MD5) Previous issue date: 2013-04-01 / Financiadora de Estudos e Projetos / The volatility of financial assets changes over time, indicating the specification of regime change in volatility models. Furthermore, the presence of asymmetry in the returns of the financial market has been recognized in the financial literature of recent decades. In this paper, we present some heteroscedastic models with regime change, considering that the error component of these models follows Skew Laplace distribution, as well as the process of estimating its parameters via maximum likelihood and Bayesian methods. / A volatilidade dos ativos financeiros se altera ao longo do tempo, sinalizando a especificação de mudança de regime para modelos de volatilidade. Além disso, a presença de assimetria nos retornos do mercado financeiro tem sido reconhecida na literatura financeira das últimas décadas. Neste trabalho, apresentamos alguns modelos heterocedásticos com mudança de regime, considerando que a componente do erro desses modelos segue distribuição Laplace assimétrica, bem como o processo de estimação de seus parâmetros via máxima verossimilhança e métodos bayesianos.

This thesis presents a collection of papers that has been published, accepted or submitted for publication. They assess price, volatility and market relationships in the five regional electricity markets in the Australian National Electricity Market (NEM): namely, New South Wales (NSW), Queensland (QLD), South Australia (SA), the Snowy Mountains Hydroelectric Scheme (SNO) and Victoria (VIC). The transmission networks that link regional systems via interconnectors across the eastern states have played an important role in the connection of the regional markets into an efficient national electricity market. During peak periods, the interconnectors become congested and the NEM separates into its regions, promoting price differences across the market and exacerbating reliability problems in regional utilities. This thesis is motivated in part by the fact that assessment of these prices and volatility within and between regional markets allows for better forecasts by electricity producers, transmitters and retailers and the efficient distribution of energy on a national level. The first two papers explore whether the lagged price and volatility information flows of the connected spot electricity markets can be used to forecast the pricing behaviour of individual markets. A multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model is used to identify the source and magnitude of price and volatility spillovers within (intra-relationship) and across (inter-relationship) the various spot markets. The results show evidence of the fact that prices in one market can be explained by their own price lagged one-period and are independent of lagged spot prices of any other markets when daily data is employed. This implies that the regional spot electricity markets are not fully integrated. However, there is also evidence of a large number of significant ownvolatility and cross-volatility spillovers in all five markets indicating that shocks in some markets will affect price volatility in others. Similar conclusions are obtained when the daily data are disaggregated into peak and off-peak periods, suggesting that the spot electricity markets are still rather isolated. These results inspired the research underlying the third paper of the thesis on modelling the dynamics of spot electricity prices in each regional market. A family of generalised autoregressive conditional heteroskedasticity (GARCH), RiskMetrics, normal Asymmetric Power ARCH (APARCH), Student APARCH and skewed Student APARCH is used to model the time-varying variance in prices with the inclusion of news arrival as proxied by the contemporaneous volume of demand, time-of-day, day-of-week and month-of-year effects as exogenous explanatory variables. The important contribution in this paper lies in the use of two latter methodologies, namely, the Student APARCH and skewed Student APARCH which take account of the skewness and fat tailed characteristics of the electricity spot price series. The results indicate significant innovation spillovers (ARCH effects) and volatility spillovers (GARCH effects) in the conditional standard deviation equation, even with market and calendar effects included. Intraday prices also exhibit significant asymmetric responses of volatility to the flow of information (that is, positive shocks or good news are associated with higher volatility than negative shocks or bad news). The fourth research paper attempts to capture salient feature of price hikes or spikes in wholesale electricity markets. The results show that electricity prices exhibit stronger mean-reversion after a price spike than the mean-reversion in the normal period, suggesting the electricity price quickly returns from some extreme position (such as a price spike) to equilibrium; this is, extreme price spikes are shortlived. Mean-reversion can be measured in a separate regime from the normal regime using Markov probability transition to identify the different regimes. The fifth and final paper investigates whether interstate/regional trade has enhanced the efficiency of each spot electricity market. Multiple variance ratio tests are used to determine if Australian spot electricity markets follow a random walk; that is, if they are informationally efficient. The results indicate that despite the presence of a national market only the Victorian market during the off-peak period is informationally (or market) efficient and follows a random walk. This thesis makes a significant contribution in estimating the volatility and the efficiency of the wholesale electricity prices by employing four advanced time series techniques that have not been previously explored in the Australian context. An understanding of the modelling and forecastability of electricity spot price volatility across and within the Australian spot markets is vital for generators, distributors and market regulators. Such an understanding influences the pricing of derivative contracts traded on the electricity markets and enables market participants to better manage their financial risks.

Copulas functions are a flexible tool for modelling the dependence structure between variables. The joint and marginal distributions of Copulas are not constrained by the assumptions of normality. This study examines the dependence structure between the gold, platinum prices and the ZAR/U.S.D exchange rate using Copulas. The study found that marginal distributions of Copulas follows the ARMA (1, 1)-EGARCH (1, 1) and ARMA(1, 1)-APARCH (1, 1) models under different error terms including the normal, the student-t and the skew student-t error terms. It used the Normal, the Student-t, the Gumbel, the rotated Gumbel, the Clayton, the rotated Clayton, the Plackett, the Joe Clayton and the Normal time varying Copulas to analyse the dependence structure between returns prices of gold, platinum and ZAR/U.S.D exchange rate. The results showed evidence of a positive strong dependence between the returns prices of gold, platinum and returns on the Rand/U.S.D exchange rate for constant and time varying Copulas. The result also showed a co-movement of exchange rates and gold and platinum prices during a rise or declining prices of gold and platinum. The results imply that fluctuations in gold and platinum prices generate Rand/U.S.D exchange rate volatility. / Statistics / M. Sc. (Statistics)