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dc.contributor.advisorRoberto Rigobon and Victor Chernozhukov.en_US
dc.contributor.authorRuben, Erik Charlesen_US
dc.contributor.otherMassachusetts Institute of Technology. Dept. of Economics.en_US
dc.date.accessioned2008-05-19T16:11:01Z
dc.date.available2008-05-19T16:11:01Z
dc.date.copyright2007en_US
dc.date.issued2007en_US
dc.identifier.urihttp://hdl.handle.net/1721.1/41711
dc.descriptionThesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2007.en_US
dc.descriptionIncludes bibliographical references.en_US
dc.description.abstractThis dissertation is composed of three chapters. The first demonstrates that natural gas violates many of the simplifying assumptions frequently used in modeling its behavior. Careful analysis of futures contracts written on gas suggests that gas prices are seasonal while returns are non-Gaussian and evidence stochastic volatility. In addition, examination of options prices indicates the intermittent presence of jumps. We find that models which disregard these properties struggle to recover options prices with any precision. Thus, we propose an alternative nonparametric approach to gas options pricing that captures these salient features while also shedding light on the nature of risk aversion embedded in gas markets. The second chapter offers a parametric approach to pricing derivatives written on natural gas futures designed to overcome the shortcomings of existing parametric schemes. First, it proposes a model of the underlying futures prices that admits stochastic volatility. Second, it makes use of a state-of-the-art Bayesian particle filtering technique to estimate the underlying process parameters along with a simulation-based technique for option pricing. While it trades off some performance relative to nonparametric approaches, such as the kernel scheme employed in the first chapter, the strategy employed is very general and allows for the pricing of more complex derivatives. The final chapter presents new estimates and approaches to estimating the home bias puzzle. It uses micro-level data to calculate households' foreign equity exposure as a function of wealth. We find simple estimates have significant errors-in-variables problems and we construct an estimator using grouping to account for this issue. Our estimates still imply low aggregate investment in foreign equity.en_US
dc.description.abstract(cont) Finally, we disaggregate the investment decision by incorporating two step decisions that allow households to forgo participating in the market. As a result of the decoupling, we find foreign equity levels closer to that of standard portfolio theories.en_US
dc.description.statementofresponsibilityby Erik Charles Ruben.en_US
dc.format.extent110 p.en_US
dc.language.isoengen_US
dc.publisherMassachusetts Institute of Technologyen_US
dc.rightsM.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.en_US
dc.rights.urihttp://dspace.mit.edu/handle/1721.1/7582en_US
dc.subjectEconomics.en_US
dc.titleEssays in applied financial economicsen_US
dc.typeThesisen_US
dc.description.degreePh.D.en_US
dc.contributor.departmentMassachusetts Institute of Technology. Dept. of Economics.en_US
dc.identifier.oclc221995855en_US


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