PhD defense: Peter Molnàr

On Friday 16 September 2011 Peter Molnárova will hold a trial lecture on a prescribed topic,
and defend his thesis for the PhD degree at NHH.

15.09.2011 - Red.

Prescribed topic for the trial lecture: Time-varying volatility: its measurement and implications

Time of the trial lecture: 09:15 in Karl Borch's Auditorium, NHH

Title of the thesis: Essays in Financial Economics

Time and place for the defense: 10:30 in Karl Borch's Auditorium, NHH

Members of the evaluation committee: Professor Knut K. Aase, NHH, chairperson
Associate Professor Aneel Keswani, Cass Business School, City University London
Professor Per Østberg, Institut für Banking & Finance, Universität Zürich

Supervisor:Professor Kjell G. Nyborg, University of Zurich, principal supervisor

Abstract: The present thesis studies two topics: volatility of financial markets and discount rates. The
first two essays study how the range (the difference between the highest and the lowest price
of the day) can be used to improve volatility models. The last essay derives a discount rate for
discounting of the cash flow under fairly general conditions.

In the first essay studies the properties of various range-based volatility estimators and
clarify some problems in the existing literature. Molnárova finds that one of these estimators
is precise enough to obtain results similar to the results obtained from high frequency data.
The goal of the second essay was to create a precise but easy-to-implement volatility model
which can be easily used by anyone. This was accomplished by incorporating the range into
standard GARCH(1,1) model. The empirical analysis confirms that the Range GARCH model
performs significantly better than the standard GARCH(1,1) model.

In the last paper, which is a joint work with Kjell G. Nyborg, a formula for a discount rate for
discounting of the expected cash flow is derived. If there are no personal taxes the wellknown
concept of Weighted Average Capital Costs provides an answer. However, the
situation becomes less clear once personal taxes are not neglected. Cooper and Nyborg
(2008) derive a tax-adjusted discount rate formula with investor taxes, but they assume a
zero recovery in default and a particular bankruptcy code. Peter Molnárova and Nyborg
generalize their work to allow for differences in bankruptcy codes and for an arbitrary
recovery rate in default. In the final (continuous) formula there is no recovery rate. However,
they explain that this does not mean that the discount rate is independent of the anticipated
recovery rate. Instead, the anticipated recovery rate is already reflected in the yield of the
bond.

The trial lecture and thesis defense will be open to the public. Copies of the thesis will be
available from: presse@nhh.no