COMSATS INSTITUTE OF INFORMATION TECHNOLOGY, LAHORE

FINANCIAL ECONOMETRICS

SUBMIITED TO SR. USMAN BHUTTA

DATE 25. SEPTEMBER 2022

ASSIGNMENT 1
 ECONOMETRICS AND FINANCIAL ECONOMETRICS
Financial econometrics is an subject of integration of finance, economics,
probability, statistics, and applied mathematics. Financial econometrics is
concerned with the empirical determination of financial concepts and ideas.
Financial operations give rise to a variety of new challenges, economics offers a
helpful theoretical framework and direction, and quantitative approaches like
statistics, probability, and applied mathematics are crucial instruments for
solving these difficulties.
The term econometrics means "economic measuring." Even though the field of
econometrics has a considerably wider application than measurement,
The application of mathematical statistics to economic data to provide
empirical support for the models developed by mathematical economics and to
produce numerical results is known as econometrics. It is the outcome of a
certain perspective on the role of economics.
The quantitative examination of actual economic phenomena based on the
concurrent theory and observational development and coupled by proper
inference techniques is known as econometrics.
Building financial models, estimating, and drawing conclusions from financial
models, estimating volatility, managing risk, testing the financial economics
theory, allocating portfolios based on risk-adjusted returns, modelling financial
systems, and hedging methods are a few of these.
Econometricians frequently employ two tools to analyse economic data and
investigate the relationships between various concepts. These are the tools:
Simple regression model
A simple linear regression model is a statistical strategy that predicts the value
of a second variable using one variable. Variables are classified into two types:
dependent and independent variables. An independent variable is unaffected
by other variables, whereas the value of a dependent variable changes
depending on its relationship to an independent variable.
In financial econometrics, we go through
Statistical Methods Overview
Asset return predictability
Models of discrete time volatility
Portfolio efficiency and CAPM
Pricing models with multiple factors
Models of equilibrium and stochastic discounting
The relationship between expectation and present value
Financial derivatives simulation methods
Financial derivatives econometrics.
Market risk forecasting and management
Financial time series with multiple variables