Time-series pioneers share Nobel Prize for Economics
Robert Engle, a finance professor at New York University, and Clive Granger, currently a visiting scholar at New Zealand’s Canterbury University, will share this year’s Nobel Prize for Economics. The recipients’ work on the analysis of time-series data has provided powerful mathematical tools for research in derivatives pricing, risk management and economics.
The Nobel Committee said Engle’s award recognises his role in devising “methods for analysing economic time series with varying volatility”, while Granger created “methods of analysing economic time series with common trends”.
Up until the mid-to-late-1980s, many risk managers, traders and academics largely assumed volatility was constant over time. The jettisoning of this flawed assumption in the interim is in no small way due to Engle’s work in the early 1980s, when he developed the concept of autoregressive heteroskedasticity (Arch). This statistical technique ushered in a new era of more realistic volatility modelling.
Engle will speak about a new correlation estimator for credit risk evaluation at Risk’s Credit Risk Summit Europe 2003, which will be held in London on October 21 and October 22. He has a long relationship with Risk, with some of his earlier volatility research appearing in the magazine - see ‘Garch for Groups’, Risk August 1996, page 36; and ‘Grappling with Garch’, Risk September 1995, page 112. Both technical papers were co-authored with Joseph Mezrich.
Granger’s research has been particularly useful in macroeconomic analysis. Most significantly, he discovered certain combinations of non-stationary time series exhibit stationarity - that is, the series fluctuates around a specific value. This result allows robust statistical inferences to be made, which shed new light on the relations between consumption and wealth, and short- and long-term interest rates, for example.
Engle and Granger will receive a total award of SKr10 million ($1.3 million).
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Risk management
Banks urged to boost third-party scrutiny amid AML crackdown
Three US regulators highlight deficiencies in banks’ due diligence on fintech partners
Clearing members welcome JSCC initial margin reforms
Stress loss add-ons touted as path to ensure defaulter pays and default fund contributions shrink
Backtesting correlated quantities
A technique to decorrelate samples and reach higher discriminatory power is presented
Could Trump presidency herald $27bn margin call on World Bank?
Think-tank’s policy plan to pull US out of multilateral threatens AAA rating, ending collateral exemption
Op risk data: Shady loans robbing Reliance of $1.1bn
Also: H20’s less-than-liquid holdings, Ripple ripped for $125m, and more WhatsApp slaps expected. Data by ORX News
Banks must close the loop on counterparty credit risk
Following a series of market and industry credit risk events, regulatory scrutiny of counterparty credit risk management practices is increasing. Now, more than ever, banks must ensure they are optimising their approaches to credit risk mitigation
Should banks risk lightning hitting twice for CrowdStrike?
Bank tech teams divided on whether to give security vendor a second chance after update crash
Risk management overhauls juggle speed and independence
Some banks say the 1.5 line of defence responds faster to risk, but supervisors are still divided