Detecting and Measuring Nonlinearity
This paper proposes an approach to measure the extent of nonlinearity of the exposure of a financial asset to a given risk factor. The proposed measure exploits the decomposition of a conditional expectation into its linear and nonlinear components. We illustrate the method with the measurement of t...
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| Format: | Article |
| Language: | English |
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MDPI AG
2018-08-01
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| Series: | Econometrics |
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| Online Access: | http://www.mdpi.com/2225-1146/6/3/37 |