Finance Commons^™

Essays On Applied Machine Learning For Implied Volatility Interpolation And Artificial Counterfactuals, Pablo A. Crespo

Dissertations, Theses, and Capstone Projects

This dissertation consists of two chapters.

Chapter 1: Volatility estimates under the risk neutral density have become a much revisited topic of interest in recent years. The density proves itself a powerful tool for sentiment analysis, since its moments provide insights about expectations in price trends. A standard procedure for its extraction utilizes artificial volatility predictions to form a dense enough grid for approximating a complete probability distribution. This paper proposes two common machine learning technique variations to produce implied volatility predictions when data is very scarce. First, a model using regularization through a variation of a generalized LASSO path …

Shapes And Transitions Of The Interest Rate Term Structure, Biwei Chen

Dissertations, Theses, and Capstone Projects

I analyze different shapes of Treasury yield curves in order to better reflect and predict the U.S. economy. Since the late 1980s, macroeconomists have found that the slope of the yield curve predicts economic activity such as inflation, output growth, and recessions, but they have not fully examined the links between various shapes of yield curve and the macroeconomy. To fill the gap, I classify yield curve shapes with the U.S. Treasury yield data, detect the shape patterns over the business cycles, and map these shapes onto corresponding inflation and production states. Although the downward-sloping yield curve reliably predicts U.S. …